Whole life insurance can often provide a pleasant outcome in the unpleasant aftermath of the death of a loved one. In sickness and in health, we care for and provide for our loved ones. At the end of our time with them, a whole life insurance policy can help us continue to provide for them after we are gone.
Whole life insurance provides for families in a very unique way because premium payments become more than just a payment for insurance coverage. Money invested in premium payments accrue and are used to increase the overall cash value of policies. With this policy holders are able to provide additional security for themselves and for their families.
Whole life insurance is a permanent life insurance, meaning it lasts for the lifetime of the policy holder. In most cases, the premium amount does not change, and the death benefits stay the same, even if the insured should develop have serious health problems. While whole life insurance costs more than term life insurance, it remains the most popular form of individual life insurance in America.
When someone signs up for a whole life insurance policy, they agree on the premium payment, and the amount of that payment which will contribute to the cash value of the policy. As they get older, the premiums either remain the same or increase according to the terms of the original agreement, regardless of age or health status. The cash value of a whole life insurance policy continues to grow while the death benefit remains constant.
The cash value of a whole life insurance policy is there for as long as the policy is in effect. Policy holders can withdraw the money and use it at their discretion. But withdrawing the cash means decreasing the death benefit.
The best way to use the cash value in a whole life insurance policy is to borrow against it. The policy holder can use this money for anything from paying off other loans to education funds. Borrowing the money also allows the insured to defer taxes on the cash value, while funds taken as a withdrawal are considered taxable income.
Premiums for most whole life insurance policies are paid on a monthly or quarterly basis for the life of the insured. Some life insurance companies also offer the option to pay a lump sum in the beginning, creating an immediate cash value to the policy, and make smaller premium payments throughout the life of the policy. Policy holders can also choose to pay a larger lump sum to pay off the policy all a once and eliminate the responsibility for paying any premiums at all. A whole life insurance policy with modified premiums means that premiums will increase incrementally as the policy holder ages.
With any whole life insurance policy, everything is clearly defined at the time the olicy is purchased. This includes the premium payment amounts, death benefits, and the amount of premiums contributed to the cash value.
Whole life insurance is essential for lots of families when it comes to setting and meeting financial goals. When people depend on your financial decisions, whole life insurance just makes sense. For a many years, Americans have shown a preference for whole life insurance. Lately insurance companies have responded to the current economic crisis by offering other insurance at lower rates. However, whole life insurance remains the most beneficial choice for many families.
Life insurance policy premium rates are affected by two major factors. The main influence is the policy holder’s personal health or family health history. The second is the age of the insured.
Regardless of weight, lifestyle and health status, an eighteen year old will always be charged a lower premium rate than an individual who is sixty years of age. The variance in rates based on age and weight tables is used to calculate rates for everyone who is being considered for life insurance coverage.
Personal health and family health history is a major contributor when calculating health and life insurance premiums. Most life insurance companies will request blood and urine samples to ensure that no pre-existing conditions exist. A licensed professional will often go to the home of the applicant to check blood pressure, weight draw blood and collect a urine sample as well as ask dozens of health related questions. These questions often include specific queries regarding family history with high blood pressure, heart disease, cancer, diabetes, cardiovascular disease and other serious health risks.
For those who may have difficulty meeting the health requirements of standard life insurance policies, there is the guaranteed issue life insurance policy where the life insurance company takes an average assumption regarding risk and will insure any apparently healthy person without blood or urine samples. Guaranteed issue life insurance policies are capped to a certain benefit level, restricting the face value to a certain level.
Consumers who are in perfect health will find that a standard term life insurance policy will offer more affordable premiums than a guaranteed issue policy simply because they are paying for some risk with a guaranteed issue policy. The guaranteed issue policy is a viable option for those with pre-existing conditions that might affect their ability to get standard life insurance. It is also convenient for people whose busy schedules do not allow them time for medical examinations and an easy out for those who do not handle needles very well. People who apply for a guaranteed issue policy are still required to answer health related questions and dishonesty could very well result in a voided policy or worse yet, one that will not pay death benefits when they are needed.
Unfortunately, one's health and family history isn't always controllable. Some diseases are hereditary and perfect health which equals affordable health and life insurance policies is not possible. Be in the best health your body or family history allows for and buy health insurance that provides good benefits and is still affordable.
Young and ready to take on the world. This is the person that variable life insurance was created for. Variable life insurance is both a security and an investment. It is much like whole life insurance, but different in that it gives the policy holder more control over the cash value and death benefits amount.
With variable life insurance, the premium may go up or down, depending on the status of the market. Part of this payment goes to pay for life insurance. Another part goes to build cash value in the policy holder’s investment portfolio. This amount is normally about four percent, but it can vary from policy to policy.
As the owner of a variable life insurance policy, the policy holder decides how to use this money. They can invest in stocks, bonds, mutual funds or explore other investment options. As the market changes, so will their cash value and death benefits. The policy holder will decide how much of his or her investment is applied to the policy and how much is reinvested. They have more control over this policy than any other, which means they are more at risk, and also have greater potential to receive higher benefits when the market is up.
Each company that issues a variable life insurance policy will issue a prospectus, which will define the policy in detail. Investors should read this prospectus very carefully before purchasing a policy. Variable life insurance policies are regulated by both the Securities and Exchange Commission and The Commissioner of Insurance, and the agent must be a member of NASD [National Association of Securities Dealers] in order to sell variable life insurance.
In extreme cases of investment choices for a variable life insurance policy loosing their value, the policy can lapse and no longer be considered a valid policy. Most underwriters offer a guaranteed minimum death benefit to keep this from happening. With these policies, the policy holder must pay a minimum premium each month.
Since variable life insurance is not strictly an investment tool, all of the monetary growth within the policy is tax deferred. This also makes it convenient vehicle for beneficiaries to avoid estate taxes. People often purchase variable life insurance policies for their heirs, who can then either withdraw the cash value or borrow against it. Withdrawing funds from a variable life insurance policy has the same effect it would with a whole life policy. The more cash value withdrawn, the more the death benefits would decrease.
Variable life insurance also gives policy holders the opportunity to make changes in their investment choices without incurring additional taxes or transaction fees. Most companies limit the number of allowable transactions per year.
Many will also offer what is known as a survivorship policy whereby two people are covered under one variable life insurance policy, and benefits will only be paid after both of them die. This type of policy helps many couples when one or the other party may not be able to obtain life insurance for medical reasons.
Variable life insurance is not for everyone. The opportunity for earning large sums of money in the form of interest and dividends can be huge, but so is the risk. Anyone considering this form of life insurance should review all of their insurance options before making a decision.
A mortgage loan is a major expense. Along with education costs and car loans mortgages, are quite probably the largest expenses one can take on throughout their lifetime. It is crucial that an individual with any one of these financial obligations take responsibility for these commitments and not burden their family members with expensive mortgage loans, car payments and tuition, books and other education-related costs.
It is a good idea to purchase a life insurance policy with enough benefit to at least cover the balance of a home loan. An excellent rule of thumb is to add all outstanding debts or expenses to the mortgage loan to arrive at a reasonable amount for the face value of a life insurance policy.
The life insurance calculator assumes that the insured will have immediate family to support even after their death. An insurance agent will help the policy holder to factor their mortgage loan into the equation when calculating an appropriate death benefit. If the policy holder should pass away and does not have immediate family living in the home, they have the option of leaving it to a beneficiary or assume that it will be sold. In either case, it is important to have enough life insurance to cover the mortgage payoff, in order for loved ones to take care of all other expenses and not worry about the largest one – the mortgage. If the home is to be sold, they will not be rushed into selling the property, often at a loss, because they cannot afford to pay the monthly mortgage payments while the house is on the market.
Insurance, by its definition, is something we hope not to collect on. We pay for health insurance in high hopes that we'll never need it. After paying life insurance premiums for years and years it may be easy to feel like as though it is all just a big waste of money.
Return of premium life insurance, allows policy holders to collect on their investment and reap the benefits of their years of investing in their own demise. After paying life insurance premiums for twenty years, a policy holder can receive all of the money they've invested. Not just a portion of it, as with whole life insurance, but 100% of the premiums you've paid.
The premiums for return of premium life insurance policies vary from state to state, but they generally range between the premiums charged for term and whole life policies. Return of premium life insurance has benefits normally associated with both term and whole life insurance. It has the affordability of term life insurance and the cash value of a whole life policy. Policy holders can buy return of premium life insurance for terms as short as three years or as long as thirty years.
The cost for return of premium life insurance is based on age, physical conditions, and habits, such as tobacco use of the applicant… much like the considerations for any other type of life insurance. Most insurance companies are able to provide a quote for return of premium insurance within twenty-four hours.
Return of premium life insurance is the perfect solution for anyone who wants to protect their family, but does not want to lose the cash invested in term life insurance. Not only do they get their money back at the end of the policy's period. An added benefit is that they will not be required pay income taxes on the money received.
Return of premium life insurance is ideal for a young person who anticipates a lot of change before retirement. Whether they are just starting a family or still single, it allows for changes in the future.
Even if a policy holder does not keep their return of premium life insurance for the full term, they are still eligible to receive a portion of the premiums they invested. The longer they keep the policy, the higher the percentage they will get back. Canceling a return of premium policy early will yield a small return, and not canceling at all will result in a full return of all premiums invested.
On the other hand, some policy holders might decide to keep the insurance after the end of the policy's period. Most companies offer a continuance term after the original term ends. Since the policy holder will be receiving a large sum of cash, it might be a good idea to invest it directly into a whole life insurance policy that will also have a cash value, but not the same type as a return of premium life insurance policy. With a whole life policy, the policy holder will be able to borrow against the cash value of this policy, without loosing the coverage.
Return of premium life insurance is the easiest way to have life insurance without losing money. It's one of the few ways to collect the benefits, without paying the ultimate price.
