Life insurance can be tough to understand; we get it and can reason with you.
Life insurance can be tough to understand; we get it and can reason with you. We at Healthcare American have been there and done that. We can help you navigate the life insurance landscape to make an informed and confident decision based on your individualized financial and personal situation. Read on to learn about a few of the most common questions and life insurance answers that can help answer some of your questions on the matter!
Needs Analysis
When considering life insurance coverage, it is a good idea to do a needs analysis and discover what types and amounts of coverage are best for you when purchasing a life insurance policy. Besides, at relevant stages of a person’s lifetime, they should consider assembling a new needs analysis, according to what their current situation might have changed to. As life always changes, so do your insurance needs. A licensed life insurance agent can help determine what amounts and types of life insurance best suits you individually. They can also ensure that throughout your lifetime, you are positioned correctly, according to what best suits you, at each stage of your life.
Some of the considerations that are taken during a needs analysis can include:
- A person’s financial capabilities and financial status.
- A person’s relationship status to include familial obligations and children or parents that depend on the insured.
- A person’s debt to income ratio
- What they might be able to afford to pay for a life insurance portfolio.
Another consideration used in a needs analysis can be: what obligations they are currently paying for that would fall burden to somebody else, and if their income did not continue because of death or disability. This can include a mortgage or business that depends on the insurance seeker’s income and/or physical and mental capabilities to ensure that the mortgage is paid, or the company is running correctly. It can also be a desire to leave a legacy behind to a family member or a favorite charity.
Considering Term Life Insurance or Whole Life Insurance
Another consideration when purchasing a life insurance policy can be a term life policy or whole life policy. Keeping in mind how each type of policy functions, it is essential to understand what the specific plan was intended for, and how each policyholder might benefit from one over the other.
A term life policy is intended to cover a specified period in a person’s lifetime. Remembering that a term life insurance policy is only for a specific term period, there is no guarantee that either the policy owner or the beneficiary will ever collect the policy payout. This is because it is only intended for that specified term of the insurance contract, and the moment the insured lives past that term, the policy will either be null and void or go up in premium cost so significantly, that it will be unaffordable to sustain. This is the reason that a term life insurance policy is typically less expensive than a whole life insurance policy.
So when is it correct to consider a term life insurance policy? Well, a term life insurance policy is typically the right coverage for an individual when that person has financial, physical, and/or mental obligations that he or she currently supports or contributes towards. Without the insurance seeker’s income, financial, physical, and/or mental assistance, the requirements would fall to another party. The other party can be a family member, such as a spouse, child, parent, or business associate. This party would now be required to fill in the void of the missing financial, physical, and mental obligation that the insurance seeker was contributing towards. This coverage may be needed during a specified time in a person’s life, such as during the time that their children are young, while the mortgage is being paid, or during the working years of a business owner’s lifetime. The coverage may only be needed during a specific period, and so a term policy might fit an individual in one of these situations best:
- Someone looking for peace of mind and security that things would be taken care of in this crucial period of their life.
- An individual who might pass away, and would not fall burden to the other parties if the insured passes.
- The type of individual that would be best suited for a term life insurance policy.
A whole life insurance policy is a contract between an individual and the insurance company. It is a guarantee that as long as the premium is paid, the policy will pay a beneficiary. This coverage will cost more than term life insurance coverage because anybody who is covered under this type of policy will get a payout. This happens as long as the premium has been paid up to contract terms. With a term life, that is not necessarily the case, as it is only paid if the insured dies during the specified period. So in many cases a term life insurance policy will never have to pay a death benefit.
A whole life policy is best suited for an individual that desires to leave a legacy to a beneficiary. It can also be used for other expenses such as funeral costs. In some cases, it makes sense to purchase a whole life insurance policy for the cash value aspect, as whole life policies have many different forms, and can grow significantly during a lifetime if appropriately invested. Many insurance carriers have different types of whole life insurance products that they offer. They can sometimes even benefit a policyholder during the living years of their life, using a living benefit type of whole life insurance product. These are complex insurance products, and best purchased through a knowledgeable insurance agent.
Do Life Insurance Premiums Increase Each Year?
Most term and whole life insurance coverage’s are set according to when you are applying for the coverage. The premiums are typically based on actuarial factors. These can include the age and health of the individual at the time of application, and of course, would be based on the:
- Type of coverage.
- The amount of coverage.
- The insurance that the applicant is applying to obtain.
The premium amounts are typically set prices that can be paid monthly, quarterly, semi-annually, or annually according to what the insured chooses. Unless purchasing a unique coverage, the premium amount is a set amount and will last as long as the coverage is in force. So a term life insurance policy will have the same price for as long as the term of the policy is in effect and will have significantly higher premiums go into effect when the term is over. So keeping a term policy after the term is over is probably not a good investment, as the premiums will be a lot higher than they were during the term of the coverage. A whole life policy will typically have the same premium throughout an insured’s lifetime. It will generally be a premium set during the time of the issue and written in terms of the contract of coverage. These rules can change when purchasing certain types of policies that have different rules, so it is best to understand what you are buying and discuss these essential details with your insurance agent.
Could Life Insurance Have More than One Beneficiary?
The answer to this life insurance question is simple – yes! Most, if not all, life insurance providers let you have more than one beneficiary. A primary beneficiary is the first person that the death benefit would be paid out to, in time of payout, usually based on the death of the insured. Contingent beneficiaries are then contacted if a primary beneficiary has passed away. It is essential to add as many beneficiaries and contingent beneficiaries as the insured chooses, but keep in mind that an insurance company may have rules regarding how many beneficiaries are allowed on an insurance contract. Here is an example of how to look at what might be taken into consideration while choosing a beneficiary:
- If you name a spouse as the beneficiary and a sibling who would take care of your children as a contingent beneficiary.
- If your spouse (primary beneficiary) also passed and could not be paid at the time of payout, the sibling (contingent beneficiary) would receive the death benefit based on the fact that the primary beneficiary (the spouse) was not able to receive the payout.
Typically, people list a few different primary beneficiaries, and possibly one or more contingent beneficiary, in order to ensure that all bases are covered. Life insurance is purchased and paid for throughout a person’s lifetime, so it is crucial that at the time of your life insurance payout claim, there is a beneficiary to accept the payout. The best way of ensuring that this can be done as efficiently as possible is by adding the proper recipients according to how you, the policyholder, desires the monies paid out at the time of payout. The beneficiaries should be listed in the order of importance on the insurance policy, according to how you, the policy owner, desires to have the payout paid at the time of payout. Keep in mind that in most cases, a beneficiary can be changed at any time the policy is in effect, but once the policyholder passes, these changes cannot be made.
Having a Trustworthy Insurance Agent is Important
Whole life insurance and term life insurance products can be offered in many different forms, and by many different insurance carriers. To ensure you’re purchasing the correct product for your lifestyle and requirements, it is a good idea to have a knowledgeable agent that can help you understand what might suit you best, at each period of your life.
We at Healthcare American can assist you in creating a needs analysis that has your current and future individual needs and goals built-in so that you can make an educated and accurate decision when choosing a life insurance coverage.
Independent Healthcare Insurance Brokers You Can Trust
Healthcare American is an independent insurance broker that you can trust with all of your personalized retirement planning needs. We provide customers with healthcare, life insurance, and retirement plans, tailored to their personal needs and individualized situations! We will provide the best insurance plans and tailor-made retirement plans to those living in the Baltimore, Washington DC, Virginia, Delaware, and Pennsylvania areas!
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