life insurance

Which Life Insurance Policy is better for you, Permanent Life Insurance or Term Life Insurance?

Both kinds of policies are evaluated by insurance companies in similar ways, with policy premiums based on your current health, your lifestyle and your medical history. The major difference between the two is that a permanent life insurance policy lets you borrow against your policy and will in effect last for as long as your policy stays current. Conversely, it is estimated that a permanent life insurance policy will also cost much more than that of an equivalent term life insurance policy.

If you currently have a term life insurance policy that is about to end, it might be possible to convert the policy to a permanent life insurance policy, which will not only guarantee that your loved ones get benefits, but will also enable you to accumulate a cash value that can be used for living expenses and medical expenses as you get older.

What Kinds of Life Insurance Can You Get At Work?

Many times employers will offer their employees a free basic group life insurance policy. Typically the benefit that is paid out will be between $25,000 and $50,000, or that which is equal to one year’s salary. In the event of your passing, while this amount will likely cover burial and medical expenses, there may not be any left over for your family and loved ones. If you have people that depend on your income, you may want to consider supplemental life insurance to ensure your loved ones are taken care of.

Along with your employer’s group policy, you may have the opportunity to buy supplemental life insurance. Having supplemental life insurance may be able to multiply your group life insurance benefit by three or four times that of your annual salary. Generally, purchasing this through your employer will be the least expensive way to acquire a life insurance policy.

What is Quality of Life Insurance Policy?

Quality of Life Insurance is an insurance policy with an add-on, or rider, which enables you to use some or all of your life insurance benefits early in the event of an illness, accident, or other medical situation. Your benefits can also be used for things like adult daycare or home modifications (the use of accelerated death benefits is unrestricted). If you should find yourself with a debilitating illness or suffer from incapacitating accident, this type of insurance will make it easier for you to continue with daily tasks.

What Affects the Cost of a Life Insurance Policy?

When applying for your life insurance policy, your lifestyle and current health are taken into consideration to establish the cost of your insurance premium. By maintaining what is considered a healthy weight, avoiding tobacco and other products containing nicotine, as well as keeping any existing medical condition under control by following your doctor’s advice, you’ll be able to apply for a life insurance policy with a low premium. For those of you who are overweight, smoke cigarettes, or have existing medical conditions, it is still beneficial to apply for a life insurance policy. Once these negatively impacted factors are under control, you can always request a reconsideration of the rating on your policy and perhaps get your premium lowered.

What are the Tax Advantages of a Life Insurance Policy?

While the primary tax advantage of having a life insurance policy is that the benefit paid is non-taxable, there are other benefits that both term life and permanent life insurance policies provide. For example, because a permanent life insurance policy has a cash value element, you can build up savings without being subjected to tax. As with anything tax-related, you should always consult with your tax advisor for detailed advice concerning your specific state of affairs.

• Tax-deferred growth - If you have a permanent life insurance policy, any interest or growth in the cash      value of your policy is not taxed until it is withdrawn. When funds are taken      out, the amount you withdraw is taxed as normal income.
• Tax-free dividends – With permanent life insurance policies, some pay dividends      as if you are a shareholder in the insurance company. Any dividends that      are paid from your life insurance policy are tax-free.

Things You Need to Consider When Choosing a Life Insurance Policy

Once you choose which type of life insurance policy is best for you, you’ll need to think about how long you’ll need a policy for and what the coverage amount is that you’ll need. Making an intelligent, informed decision starts with considering the following:

How Long Do You Need a Life Insurance Policy For?

The duration of your life insurance policy will depend on how long you expect to financially support your loved ones. You need to ask yourself these pointed questions when contemplating how long you may need life insurance:

• Do I have a mortgage or other debt?
   If you have compiled debt, the length of time it will take you to pay it      off can be a helpful factor in considering the length of your policy.
• Who actually depends on me?
  If you have a good idea of how long you’ll be depended on for financial      support from a spouse, children, or other loved ones, it can help you calculate  the length of time you’ll need a term policy.
• What can I really afford?
  Your term length can be affected by the dollar amount of life insurance      coverage you need. If you require a high amount of coverage, you may want  to think about getting a shorter term length to fit your finances.
• 
  

How Much Life Insurance Coverage Do You Need?

While some seasoned insurance professionals will suggest that you need coverage between 7 and 10 times your annual salary, this is often an over generalization as it can differ immensely based on your individual needs. Ask yourself these questions when considering how much life insurance you need:

• How large are my debts?
  A good start to determining the total amount of your outstanding debt is  to compile a list of your mortgage, student loans, business loans and any other debts you may have.
• What life events do I want secured for my family?
  Depending on your specific situation, you may want to make provisions for your  death benefit to help with childcare or college tuition for your children.  In addition to your funeral expenses, perhaps you may want to consider supplemental  retirement benefits for your spouse or life partner. Then, once you’ve      considered exactly what you want your death benefit to cover, try calculating the total amount of money needed to accomplish your goal.

How Frequently Should You Review Your Life Insurance Needs?

Ideally, you should look at your life insurance policy and coverage at least annually. In the event you experience a major life change during the course of the year such as a marriage or divorce, the birth or adoption of a child or grandchild, the purchase of a new home, or if you or your significant other had substantial changes in your health, you should review and consider updating your life insurance policy.

While the answers to many of these questions may not seem clear right away, with a little thought and deliberation ahead of time and some direction from one of our licensed agents, you’ll be able to make an intelligent and informed decision on the type of life insurance policy that is best for you.