Life Insurance: Coverage for you and your family

by zhl203 » Tue Dec 08, 2009 04:26 am
Posts: 10
Joined: 08 Dec 2009

When you have family members depending on your income, saving for the future of your loved ones is a good idea. Investing in life insurance will give you enough financial support to take care of the future of your loved ones when you are no longer around. A life insurance plan also makes provision for a cash value where a part of your premium is put into a savings account. Hence, while you invest for a secured future, you can make savings too.

What is life insurance?

Life Insurance means insuring your life to save for the future of your family. If you have family members depending on your income you may invest in life insurance. This is a contract between you and your insurance company where your insurer agrees to pay a certain amount of money to your beneficiary in the event of your death.

What are the types of life insurance?

  • Term Life Insurance:

    For those who are running on a budget, you can opt for a simple life insurance. Term life insurance allows the beneficiary death benefits for a specific period or 'term'. This term may be 1 or more years and the benefits are paid only in the event of death of the policy holder within the term of the policy.

    There are certain term life insurance that can be renewed for more than one additional term. However, if you do so, your premiums may go higher. You may even sometimes be allowed to trade your term life insurance for a whole life insurance policy.

    Term Insurances are of 5 types:

    1. Annual renewal term insurance: Allows you to renew your term insurance every year till you reach a specific age which often freezes at 65.
    2. Renewable term insurance: With expiry of the term of the policy (generally 5-20 years), you can automatically renew the policy even if your health condition has worsened. It is similar to the annual renewable policy but this one is for a longer period of time.
    3. Level premium term insurance: Ensures that your premiums will not go higher for the term (between 5 and 20 years) of your policy.
    4. Decreasing term insurance: Allows your premiums to stay level throughout while decreasing your cash benefits each year. Such policies are usually used to cover items whose costs decrease with time.
    5. Convertible term insurance: With this policy you may convert your term insurance into any other type of life insurance policy that the company offers.

  • Whole Life Insurance:

    A whole life insurance covers a policy holder for his entire life. There is no date of expiry like in a term life insurance and the death benefits will be received by the beneficiary mentioned in the policy only in the event of the death of the policy holder. If you buy a whole life insurance you will have to pay a higher premium as compared to a term life insurance. The reason for this is that a certain portion of the premium paid for whole life insurance is put away into a savings program.

    When you compare the total premiums paid for whole life insurance and the total premiums paid for term life insurance it is seen that whole life insurance is less expensive. Even if you pay higher premiums for whole life insurance, the fact is that the premiums remain the same throughout the tenure of the insurance. But in the case of term life insurance, you may be paying lesser premiums in the beginning, but as you renew your term policy, premiums will increase. Hence, the total value accrued in term policy is bigger than a whole life insurance.

    Certain clauses in a whole life insurance allow you to pay premiums for a lesser period of time. The greatest advantage in this policy is that the premiums develop cash values that may be claimed or used for purchasing rider policies for more protection. Few of the whole life insurance benefits are:

    • Guaranteed death benefits
    • Guaranteed cash values
    • Fixed annual premiums

    A whole life insurance also known as "straight life" or "ordinary life" insurance, is not just an investment for your future alone, but also for the future of your family.

    To understand the basic difference between term life insurance and whole life insurance click here.

  • Universal Life Insurance:

    Universal life insurance is a flexible policy that provides security for you and your family. To know more please click here.


How to save money on life insurance policy?

When you shop for life insurance coverage, there are certain ways by which you can save money on your policy. You must look for a policy that meets your needs and the right kind of benefits received. If you think that buying a policy with a low premium will save your money think again. If you buy inadequate insurance, it will be a sheer waste of money. However, you can maximize your life insurance dollars using some of the tips provided here.
  1. Seek financially sound companies: Look for companies that are financially strong so that when your beneficiary(s) make a claim, he may receive the benefits of life insurance without hassle.

  2. Shop around: Get life insurance quotes from more than one insurance provider. You may even ask an insurance agent or an insurance broker to get you few insurance quotes from different carriers. You may then compare the quotations and find a policy that suits your needs as well as pocket.

  3. Seek group insurance: Employer provided group life insurance is often given at subsidized rates so you may find a less expensive policy here. Even if you have to pay premiums out of your own pocket this might be a good idea for the subsidized rate they provide. However, premiums paid by you will probably be through payroll deduction which is convenient. But a comparison of group and individual rates depending on your age, health must be done to assess which is the best policy for you.

  4. Change in lifestyle: Maintain a healthy lifestyle. Smoking may rate you as a risk option and you may have to pay higher premiums. Exercise regularly and consider making more lifestyle changes if necessary.

How to decide on the type of life insurance to choose from?

You may go for term life insurance if:
  • You need to make a short term investment and not a permanent one. With term life insurance benefits you can ensure the education of your children if you can invest in time. If there is a debt that you have to pay off, you may invest in term life insurance. Term life insurance covers you for a term of 5 to 20 years.

  • You need a big amount of life insurance with a premium that suits your pocket. A term insurance usually pays only in the event of death of the policyholder. However, if you are alive at the time the policy ends, term life insurance coverage will stop until you renew it. But here, you will not build a savings like in a whole life insurance.
You may opt for whole life insurance if:
  • You need life insurance stretching for the tenure of your life. A whole life insurance would pay the beneficiary the death benefit no matter when the policyholder dies.

  • You feel the need to accumulate a savings on a tax-deferred basis. A whole life insurance has its own savings program that puts aside a certain portion of the amount you pay as premiums into the savings program.
Click here to know more.

Can you pay your mortgage with life insurance?

Yes. With mortgage life insurance your mortgage loan can be paid for in the event of your death in a time when the loan is not paid off fully. This insurance is available for 15 and 30 years where for the first 5 years, the amount of insurance is level and then decreases on an annual basis. The premiums for mortgage life insurance can be paid annually, semi-annually, quarterly or monthly.

How should you choose a life insurance company?

When choosing a life insurance company, take the following into consideration:
  • Identity of companies - Make sure to know the full name, office location and affiliation of the insurance company that you plan to buy from.

  • Product sold - Check out what products the company is selling. Most often the companies provide a wide range of policies. Check for what you need and if they have it you may consider buying from them.

  • Financial Security - Select a company that is strong financially and has been in business for long. Your life insurance is an investment to secure your lifetime. Be sure that your insurance company will make life easy for you and not otherwise.

  • Ethics - Check if your company abides by the codes of conducts and principles of the Insurance Marketplace Standards Association. This non-profit organization promotes ethical conduct in life insurance marketing.

  • Agent - An agent is supposed to help you out with your insurance needs on behalf of the company. You must consider taking help from a reliable person only. If there is any discomfort in dealing with the agent, move to another one.

  • Cost of insurance - Based on your age, type of policy and features, and the amount of insurance to be purchased, compare one insurance company with the others. Find out one which offers a better coverage.

  • Claims - A national claims database will give you the complaints (if any) against an insurance company. You may want to check to find if the company you are considering buying from is listed for consumer complaint.

How does a life insurance company choose you?

Your application for a life insurance policy has to go through the insurance underwriting process before it's approved. The underwriters evaluate the risks associated with your application and forward it to the insurance processing department of the company.

Factors that influence underwriting procedure for Life Insurance
  1. Age of the individual to be insured.
  2. Gender of the person
  3. Pre-existing medical conditions
  4. Medical records of the family
  5. Smoker or non-smoker
  6. Mental health of the person
  7. Occupation
  8. Hobbies or lifestyle habits (activities like race car driving, mountain climbing or bungee jumping might be marked as risky)
  9. Driving records
  10. Credit history
  11. Selection of coverage limits, benefits etc.
  12. Medical reports after thorough health check-up including tests like :
    • > Blood pressure level
      > Blood sugar level
      > Cholesterol level
      > Weight of the individual
      > Urine tests
      > Blood tests
      > EKG/ECG
      > X-Rays
      > Stress tests etc.

Click here to know how the above mentioned factors affect the rates of a life insurance policy.

Your life insurance policy might not come to your assistance in your lifetime. However it'll help securing the future of your loved ones when you won't be there to take care of them. A small amount spent at regular intervals will thus be able to give you the sense of security, as you hand over the risks to your insurer. Top

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My parent bought whole life insurance that pays dividends many years ago. The sales representative told my parent that she can stop paying premium in approximately 12 years because the it policy would be able to pay for itself at that time. And at the same time the policy will make annual distributions to my parent. What does that mean? Is there such thing?

The reason why I'm asking is because they're into the 13th year now and they are still paying the expensive premium. When I called the representative, they told me that the account has accumulated certain cash value and dividend, but the accumulated dividend can only cover approximately 3 years of premium.

I did some research, I understand that the cash value is like equity, but is it truly equity like we really own the money? if yes, when can we cash out the equity? if we cash out, the policy terminates? I understand that when the insured dies, the beneficiary would get paid the face amount, but what happen to the cash value? who gets it? Also, what happen if the insured dies of old age (not due to accident), is it still covered by the policy? what happen to the cash value?

Thanks in advance for your help.

Total Comments: 282

Posted: Fri Jun 24, 2011 01:19 am Post Subject:

The last two vul policies that I saw were from AMP and Mass Mutual. Neither had a sales load approaching 8%. Max, if this is the norm, can you name one company?.

Posted: Fri Jun 24, 2011 12:23 pm Post Subject:

I'm not doing your homework for you. You sling BS and refuse to post details in any thread in which you become involved -- and when push comes to shove, you state things like, "Well, I really don't know . . . " as in:

Don't you have things a little backwards? You are claiming that 8% is common. I have done my homework. I can't post about a company charging a 8% sales load because I can't find one. That is why I am asking you to back up your claim.

The previous poster mentioned 2 companies that don't charge 8% loads.
MetLife charges 2.25% up to the target premium.

Prudential charges 4% up to target in years 1-4 and 3% in years 5-10 and 0% after 10 years. The amount that they charge for amounts above target are 1% less.

Ok, since 8% is what is common and 4 companies have been mentioned and they are all way under 8%, isn't it now on you to back up your claim?

I'm curious as to how you are going to handle this since you don't have it in you to ever admit that you are wrong.

Posted: Fri Jun 24, 2011 12:40 pm Post Subject:

So tell us what you DO know. So tell us how YOU think VUL sales charges are paid (before or after the money goes to the separate account) and how they are calculated. Tell us how much YOU think the maximum cumulative sales charge in a contractual plan, such as a VUL, is permitted to be, and for how long a period it can apply to.

Unlike you, I have no problem admitting when I don't know something. You are willing to have conversations about a product despite not being licensed to sell it. I don't sell the product because the fees are outrageous and it doesn't make much sense, in general, to buy a permanent insurance product in which the cost of insurance per thousand increases every year.

The sales load comes immediately off the top before it goes into the separate account. Ex. Max buys a VUL with a 3% load and pays a $100 premium, $3 comes off the top. This $100 may get hit with other charges, but this is immaterial to our discussion about sales charges.

I don't know what the maximum sales charge that the government allows. I don't know how long it can apply. Those questions are changing the subject. We are talking about what is COMMONLY charged and not the limit as to what is charged. You will criticize me for not knowing those answers. I, at least, can admit to not knowing.

To defend myself on that lack of knowledge, my opinion is that it doesn't matter unless I am trying to take a test. VUL is sold by prospectus. What matters isn't the most that can legally be charged by VUL in general. Rather, what matters is what the contract purchased is charging currently and how much their maximum is. In other words, it doesn't matter if legally a contract can go as high as 8.5% if ABC VUL has a maximum of 6%. ABC can't go above 6%, so the 8.5% is meaningless to the client.

Posted: Tue Jun 28, 2011 10:14 am Post Subject:

I am bumping this to see if Max will respond since he appears to be wrong.

Posted: Tue Jun 28, 2011 02:19 pm Post Subject: Insurance misconduct by AGENT

Massachuetts Mutual Life Insurance Co. refuses to admit forgery by Agent ,for LOAN REQUESTS with out my approval or consent.

Posted: Tue Jun 28, 2011 10:31 pm Post Subject: PLEASE EXPLAIN "ENDOWMENT POLICY".I PURCHASED TWO.


Posted: Mon Jul 04, 2011 06:26 am Post Subject:


If your policy has an "Automatic Premium Loan" provision, the answer is YES . . . until all the cash value has been loaned out, after which time the policy will lapse if no additional premiums are paid.

Posted: Mon Jul 04, 2011 06:30 am Post Subject:

Massachuetts Mutual Life Insurance Co. refuses to admit forgery by Agent ,for LOAN REQUESTS with out my approval or consent.

If you believe this is what has happened, file a complaint with your state's Dept of Insurance and let them investigate it.

Posted: Tue Jul 05, 2011 02:44 am Post Subject:

Look at your policy. On the applicatio, is the provision checked for an automatic premium loan? If so, a missed premium will result in a loan. You are not borrowing the cash value. You are borrowing the insurance company's money and collateralizing it with the cash surrender value.

Posted: Fri Jul 08, 2011 09:13 am Post Subject: Life Insurance

How does life insurance differ from other insurance?

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