What Is Life Insurance?
Life Insurance Greenville gives you financial security to help pay for a mortgage, children’s college tuition, and funeral costs. It also provides income replacement to your spouse or loved ones after your death.
To choose the right coverage, assess your family’s annual expenses, debt, and financial goals. Factors affecting rates include age, health, occupation, and hobbies.
Life insurance is a contract between an insurer and a policyholder that guarantees the insurer will pay money to named beneficiaries upon the insured’s death. In exchange for the promise of payment in the event of the insured’s death, the policyholder pays a premium. The premium may be a single payment or paid over time. The contract is in effect as long as the premiums are paid (for permanent policies) or until the term of the policy expires (for term life insurance).
Beneficiaries are individuals, typically family members. You can name as few or as many beneficiaries as you want, but only the beneficiaries designated in your policy will receive the death benefit. It’s important to update your beneficiaries regularly and consider changes in family dynamics – births, deaths, marriages, remarriages, and divorces – when doing so.
It’s also a good idea to take the time to calculate how much your policy will pay out in the event of your death or how long it will last if you choose a term life policy. To do this, multiply your annual income by the years you expect to be alive and add any outstanding debt, such as your mortgage, child care expenses, or funeral costs, that your family would need to cover in your absence.
State insurance commissioners regulate the life insurance industry and provide consumer protection through policy forms, rates, premiums, and operations. The NAIC’s Life Insurance Illustration Issues Working Group explores how the narrative summary and policy overview required by NAIC Model Regulation #582 can be enhanced to promote a greater consumer understanding of life insurance policies.
Several types of life insurance policies are available to meet your needs. They generally fall into two categories: term and permanent. Term policies provide coverage for a specified period, while permanent policies remain in force until the insured dies, stops paying premiums, or surrenders the policy.
Whether you want to cover expenses for the remainder of your life or pay off debts, there is a life insurance policy that is right for you. Some policies also accumulate cash value you can borrow against or access during your lifetime. Whole life, indexed universal life, variable universal life, and final expense policies are some of the most common types of permanent insurance.
In addition to the death benefit, some life insurance policies have a cash value component that earns interest and builds up over time. These policies usually cost more than term policies with similar coverage amounts.
The amount of the death benefit and the cash value build-up are determined by underwriting. During underwriting, a company assesses your risk and decides how much to charge you for the policy. Fully underwritten life insurance policies require a medical exam and may ask about your health history. Simplified issue or guaranteed issue life insurance does not require an exam and has a lower coverage amount. These are often purchased by seniors who have been turned down for a traditional life insurance policy or by people seeking to cover funeral costs. These policies typically have graded death benefits, which means that if you die in the first few years of having the policy, your beneficiaries will only receive a portion of the payout.
Life insurance offers peace of mind by providing a death benefit to help your loved ones cover final expenses or care for debts. It can also help supplement retirement savings.
The amount of coverage you buy depends on your needs and financial goals. NerdWallet’s life insurance calculator can help you determine how much you need. It will show you how much your death benefits might be, based on the type of policy you choose and other factors such as premium payments and any potential increases in the death benefit over time.
Some policies include living benefits, which can pay out the death benefit while alive if you contract an illness that meets certain conditions. These are called “accelerated death benefits” and can be used for the treatment of diseases like cancer. Other options let you use your death benefit to pay off your mortgage or other debts or for a lump-sum cash payout.
When you buy a policy, you name one or more beneficiaries who will receive the death benefit. Typically, these are family members but can be other people or entities such as charities or trusts. You may also add contingent beneficiaries, who will receive the death benefit if your primary beneficiaries die before you do.
Choosing the right policy can be confusing. A financial professional can help you understand the different types and compare costs. They can also assist you decide how much coverage you need and what options are best for your budget. They can also suggest ways to save money, such as improving your health or giving up tobacco products. And they can help you find a term policy that can convert to permanent coverage later.
A life insurance premium is paid regularly to keep the policy active and allow it to pay out later. The premium may be spent in a lump sum or a series of payments. Premiums are based on many factors, including the type of life insurance coverage you choose, your age, and your medical history. In addition, your occupation and lifestyle can also impact the premium you will pay. For example, dangerous hobbies or jobs can increase your risk level in the eyes of the insurer and lead to higher rates.
Other factors include the coverage amount you select and whether or not you opt for a permanent or term life insurance policy. Permanent policies usually have a fixed premium throughout the policy but can be more expensive than a term policy. Lastly, your credit score may affect your life insurance premiums, as can any bankruptcies or other risk factors on your credit report.
While some factors are out of your control, others can be easily adjusted to lower your life insurance premium. For instance, women typically pay less for life insurance than men, as do those who make healthy lifestyle choices. Smokers and drinkers will also find it easier to get approved for life insurance if they change their habits.
Having the right life insurance policy is important to ensure your loved ones have the funds they need when you pass away. NerdWallet’s life insurance calculator can help you determine how much coverage and premium you need. You can also compare different life insurance policies side by side using our Life Insurance Comparison Tool.
Often, life insurance policies come with riders that provide additional benefits to the policyholder. They can include features such as purchasing coverage without further underwriting, using some death benefits to pay for chronic illnesses, and more. While riders can add to the cost of a policy, many are affordable and can help ensure that a life insurance plan covers all the needs a family may have.
Common life insurance riders include accelerated death benefit coverage, which allows the policyholder to receive a portion of the death benefit if they are diagnosed with a terminal illness, and children’s coverage, which provides additional coverage for children when the parent or guardian dies. Other available riders, though not necessarily required by law, include a disability rider, which delivers a payout if the policyholder becomes disabled, and an accidental death benefit, which pays out a higher amount of the death benefit if the policyholder dies from an accident.
When considering them, people must review their life insurance options, including riders, and talk to a financial professional. A knowledgeable agent should be able to discuss their unique circumstances and determine whether a rider is worth the extra cost.
In addition to allowing people to customize their life insurance policies, riders can make it easier to qualify for coverage or offer a better rate depending on the person’s situation and health status. For example, a waiver of premium rider allows people to continue their coverage during certain periods without having to undergo a medical exam. Many other types of riders can be added to either term or permanent life insurance policies.