Life Insurance: Coverage for you and your family

• 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.

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.

• 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 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.

• 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.

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.