Life Insurance & Finance

Here we explain the benefits inherent to Level Term Life and others that differentiate it from other life insurance types which include the following:

Temporary Coverage

Pure Death Benefit Feature

No Cash Build-up

Fixed Coverage Amount

Increasing Premiums

Insurance exam for Qualification

Tax-Free Inheritance

Short-term Protection

Term life offers coverage for a limited time frame, typically 10-30 years. Unlike other styles of life insurance, a term policy eventually expires. This can be a positive or negative feature according to individual situations. For the one hand, temporary coverage means lower start-up premiums. On other other hand, after the policy expires it might be hard to secure an extension as a result of worsening health problems. If you can accurately predict the amount of time you might need coverage, a term policy is most economical.

Pure Death Benefit

Permanent forms of life insurance have savings and investment components that may or may not be suitable for your purposes. Term life offers no such component; think of term life insurance as life insurance proper, whose aim is to give a lump-sum payout upon the death of the policyowner. This benefit may be used to buy funeral and medical costs or even replace lost income. If you need to grow wealth in your life insurance plan, consider a permanent variety of universal or variable life insurance.

No Capital Savings
Term Life Insurance doesn’t accumulate money with time as a whole, universal, or variable insurance plan would. Term Plan premiums go directly towards securing compensation in the event the unthinkable should take place. After you stop making premium payments or the policy matures (reaches the end of the term), you are left with zero capital. Premiums are utilized to solely fund the death benefit, of course, if no death occurs, the insurance plan company never pays out. This is a direct expense of insuring against threat of death.

Set Coverage Amount

Like all life insurance, term life can be purchased with widely varying death benefits, from only $100,000 to as high at $10,000,000. The amount of coverage desired directly affects the type of the annual premium, as the insurance company charges policyowners per $1,000 of coverage. One problem with term life policies is that when a coverage amount is defined, it cannot be increased or decreased. This is not a problem in theory if you can accurately estimate the best level of coverage for the complete length of the policy’s term, but in practice your finances will change so often over the course of 10-30 years. Prefer a flexible coverage sum and annual premium, contemplate universal life or variable universal life.

Increasing Premiums

Most term life (non-level term life) includes premiums that rise every few years. This results from rising risk of death because the policyholder ages. Fundamentally, all coverage faces the grim fact of escalating mortality charges. The main difference is, permanent life insurance averages out later premiums with former ones, enabling the owners to fund their policies with uniform annual payments. If level premiums are important for you, consider purchasing level term life or a permanent life insurance product. If you really only need temporary coverage, a level-premium policy should be to your disadvantage.

Paramedical exam for Qualification

With the exception of guaranteed life, practically all forms of life insurance coverage force potential policyholders to undergo a medical examination before issuing a policy. The exam is performed by a paramedical hired by the insurer. The paramedical can come to your home or office to administer the health exam, which typically contains taking physical measurements life height and weight, taking a blood and urine sample for analysis, and asking health background questions to determine hereditary conditions that may put you at greater risk of death. Depending on the test results the insured is given a rating class (Preferred Plus, Preferred, Standard Plus, Standard) which skews premiums higher or lower.

Tax-Free Inheritance

A great good thing about all insurance types is being able to give wealth tax-free and avoid estate taxes. Unlike other investments vehicles, term life insurance is uniquely designed as being a wealth transfer instrument. Beneficiaries do not have to pay taxes on any funds passed along to them via a term life insurance death benefit.

Term life insurance is becoming more and more popular as a way to protect loved ones you may leave behind. The premiums are much less costly than ones for whole or universal life insurance, which is one of its big selling points. 

What is “Term Life”?

Term life insurance is a policy you buy for a specific period of time. You could choose to have your policy expire in ten years or as many as thirty. If you die within that time frame, the policy pays the death benefit to your beneficiaries.
Continue reading “Term Life Insurance – a safe bet?” »

There are many types of life insurance with different features and benefits that meet different needs. Prior to purchasing a life insurance policy you need a primary understanding of the different types of polices available.

Term Life Insurance Explained

Term life insurance offers insurance coverage for a term of from 1-30 years. Yearly premiums are paid to the insurance firm to continue the policy in effect. If the policy owner dies during the term, his or her beneficiary is paid a lump-sum of money. If the policy owner lives beyond the term, the policy simply expires, and no death benefits are paid.

There are no savings or investment characteristic to a term life insurance policy. The insured must fill medical conditions prior to obtaining a policy. The yearly premium varies depending on the sum of coverage desired and the insured’s age and wellness. Because chances of death increase with age, standard term life premiums increase every year.

The pros of term life insurance are its affordability and the short term protective cover it provides without any risk. The cons include the temporary nature of the insurance coverage, annually-larger premiums, and no gains on you investiture. Term life policies work well if you want to pay off a mortgage in the event of your death or for other similar period specific life insurance needs.

Whole Life Insurance Explained

Whole life or permanent life insurance provides a lump sum payment to the beneficiaries upon the insured persons death. The vantage of whole life policies is they have no specified term, so as long as the premiums are continualy paid the policy will remain in effect for life, or until the endowment age which is typically 100. This just means that if you live to the endowment age, the benefit / proffit is paid to you at that time and the policy is no longer in effect. An additional advantage of the whole life policy is that the monetary value in the policy can be got at in if the insured needs the funds or can no longer make the monthly premium payments.
The premiums for a whole life policy are more expensive than term insurance since the policy holder is covered up till the end of their life. Often the premiums are fixed or decrease over time. This is possible because the insurance provider can invest part of the premium in bonds and investments and use the proceeds to cover the rising cost of insurance premiums and/or to make a payment when the insured dies.

Whole life is generally purchased as part of an estate preparation arrangement to make sure inheritors are looked after if you predecease them.

Universal Life Insurance Explained

Universal life is also named “flexible premium adjustable life insurance,” and is a more flexile version of whole life insurance. Like whole life, universal life includes a savings element that grows on a tax-deferred basis. A percentage of your premiums are invested and the return on the investments is accredited to your policy tax-deferred. Most policies vouch a minimum return on your investment. Universal life offers two death benefit options. One pays the death benefit out of the policy’s monetary value; the more cash value you work up the less the policy costs the insurance provider. The 2nd alternative pays a flat amount stated in the contract, plus any cash values you accrued over the years and costs more.

Universal life policies give you the power to set the death benefit as your needs alter, as well as the flexibility to pay lower or greater premiums for a set period of time. However, you need to make a minimum premium payment as assigned in the contract to avoid the policy lapsing.

Universal life like whole life is broadly used as a part of an estate plan to ensure inheritors are taken care of after your death.

Variable Universal Life Insurance Explained

The variable universal varies dependant on the performance of the investments chosen by the policy holder.

Since the insured decides the investments for a variable universal policy the risk and benefits of the investments falls to policy holder. The policy allows for the insured to choose among an assortment of investments so the investiture can be dispersed between higher and lower risk investments to ensure there is always some economic value to the policy and still capitalize on higher risk investments with the potentiality of higher returns. If the investments perform well the policy holder doesn’t have to pay a premium. If the investments perform poorly there is the risk the premiums will have to be paid or the policy will lapse.
Life insurance premiums alter within a set array and the cash value of the policy.

Insurance Choices

Work with a qualified and independent financial advisor to have your options for life insurance explicated amply prior to you making a decision as to which type of insurance to buy. One type of insurance is not better than a different one but for each one there is a distinct advantage and disadvantage dependent on your specific financial targets and requirements.

Why would someone not get life insurance
 The reasons why people don’t get life insurance
or delay can be simplified:

� You feel there’s no reason or need to have it
� Can’t afford it (or don’t want to spend the money)
� Don’t have time to take care of it.
� You aren’t confident about where and what to purchase
� You don’t understand how much to get or which kind of life insurance to get.

Let’s address each of these points.

You feel there’s no need or reason to have it. Sometimes this is true. You’re 20 years old and single. Maybe not today. But let’s say you have a family or loved ones that would be hurt financially if your income wasn’t there. In that case you would agree that you do need it and want to have life insurance.
You feel you can’t afford it. Money is tight sometimes but if it’s tight now what would the financial situation be like for family and children? Get term life insurance for now. Prices are at an all time low.

You don’t have time to take care of it. Usually this comes from just not understanding how it all works  if you recognise the importance of having it. People just don’t like to deal with things they don’t understand. It’s not that hard. Try the education pages of uklifeinsurancesolutions.co.uk or just start with something simple like term life where you own life insurance for a period of time at a fixed rate
Where to go and what to get? Again, try it online and study on your own if you don’t want to get “sold to” or feel you have a lack of understanding.

How much to get and what kind? The formula for how much is actually pretty simple. You should replace your income. Life insurance is really income replacement. As a rule of thumb, if you got 15 to 20 times your income as a breadwinner, you’d be doing well for your family. What kind? Term is inexpensive for now, whole life lasts for life. Term will cost more later, whole life doesn’t go up in price and compensates for the “overpayment” with cash value.

Most important point: Make sure you take care of this important part of family financial planning. There are online resources to help make purchasing life insurance or term life insurance
easy for you.

Due to the recession and the current financial climate here in the UK, more and more people have been opting to purchase Term Life Insurance as opposed to Whole Life Insurance.
Because Term Life Insurance is set for a certain amount of years the premiums are cheaper and more affordable when compared to a Whole Life Insurance policy. With more and more of us unable to obtain credit and employment being an uncertainty these days, this results in many of us opting for the cheaper option of  Term Life Insurance. 

The benefits of taking out a term insurance policy is that it is cheaper as it only runs for a certain amount of time (10 years for example) but what we have to consider is what changes are going to happen to our lives during the course of  both policies.

Younger people tend to take out a whole life insurance policy and will shop around online trying to find the cheapest online life insurance quotes. At a young age you have a much larger desposable income and affording your premiums is much easier.
Granted, that we tend to find ourselves more financially stable as we get older but if you remain in the same employment and decide to settle down and start a family you find that your living expenses have grown considerably since originally taking out your Whole Life Insurance Policy.
The cost of children is quite expensive and also usually results in one of the partners giving up work which means that on top of the expense, your income has also reduced. 
Soon after having children is where the majority of us start to think about life insurance and this is where a Term Life Insurance Policy looks most suitable as it is the cheapest option.

With life expectancy rising, the cost of a whole life insurance policy could cost quite a considerable amount and may not be a shrewd investment as you first thought.
If you take out a cheaper term insurance then find your income is growing, it would be a wise and shrew decision to use a proportion of this extra income to invest in other things.
With a whole life insurance policy you are basically paying the insurance company to invest this money on your behalf and you have no control over where your money is invested.

To conclude, a Term Life Insurance policy is an easier, more flexible and cheaper option with less commitments attached so is more suitable should your lifestyle / situation change and also gives you the control of investing any extra income into whatever you wish.