Due Life Insurance Plan

The loss of a loved one is never easy. In fact, it can be emotionally devastating. As if that weren’t challenging enough,  it can also have a significant impact on the family's financial future. After all, without the deceased's income, it will be more difficult to pay expenses like a mortgage or a child’s education.  

And, that is the primary reason why people purchase life insurance; to ensure that their families are secure financially. 

Upon your death, a life insurance company promises to pay out a sum of money to those who depend on you. The premiums you pay are in return for this peace of mind. A life insurance premium can vary based on a number of factors, including age, gender, medical history, and the policy amount.

If you pass away, life insurance will provide the beneficiaries, or people you specify, with money that can be used however they like. Typically, this includes income replacement, covering essential living expenses, and paying off debts. However, it can also be used for estate taxes, medical and funeral expenses, and funding a child’s education. And, in some cases, life insurance can be used to supplement your retirement savings.

There is no universal life insurance policy. 

Depending on the policy, you may have coverage for your entire lifetime or only for a specific period of time. There are some that build cash values and others that don't. Other policies allow you to switch from one type of insurance to another. There may also be other benefits you can receive while still alive if you have a life insurance policy. 

Overall, however, life insurance comes in two basic categories: term and permanent.

• Term insurance normally has lower premiums in the early years of the policy. But, the cash value of the account does not accrue for future use. You should consider term insurance if you need coverage for a specific period of time. If you die within that term, the death benefit is paid. Term insurance generally provides the best value for your premium dollars. 
• A permanent policy provides long-term financial security (such as universal life, variable universal life, or whole life). Often, these policies include death benefits as well as cash savings. Generally speaking, premiums are higher because of the savings component.

“It’s hard to pinpoint how much life insurance you should buy down to the penny,” notes Georgia Rose for Nerdwallet. However, you can use an online life insurance calculator to get a ballpark figure on how much you’ll need.

“In general, you should add up your long-term financial obligations, such as mortgage payments or college fees, and then subtract your assets,” adds Rose. “The remainder is the gap that life insurance will have to fill.”

Other strategies you can use to estimate this figure include;

• Multiply your income by 10.
• Buy 10 times your income, plus $100,000 per child for college expenses
• Use the DIME formula, which stands for debt, income, mortgage, and education. These are the “four areas that you should account for when calculating your life insurance needs.”

Honestly. It depends. 

Your main consideration should be the duration of the coverage. Term life insurance, which is generally sold with terms of five, 10, 15, 20, 25, or 30 years, may help your children prepare for college or other future endeavors, for instance, if you have young children. Alternatively, if your child is currently not in college and supports himself or herself, a shorter policy period may be more suitable.

Other considerations would be the length of your mortgage and the number of years until you retire. 

Beneficiaries of your estate generally receive death benefits tax-free. With permanent life insurance, the cash value accumulates tax-free. That means as long as the policy remains in effect, all income earned would be tax-free.

An annuity is a financial product offered by insurance companies. Individuals pay monthly or in a lump sum and receive either a lump sum or regular payments over a period of time.

You may be surprised by how affordable workplace life insurance can be. A quality company can provide term life insurance coverage at a surprisingly low cost for most people.  Even if insurance through your employer isn’t an option, it’s still not as expensive as you may think. But, premiums are based on factors such as age, sex, height, and weight. Your health status, like whether or not you smoke, occupation, and state you live in are also considered.

Typically, the cost of life insurance increases as you age, and the kind of coverage you choose will also affect your premium. And, term policies tend to have lower rates, whereas permanent policies tend to have higher rates.

It’s strictly dependent on your needs when it comes to buying life insurance. Again, the younger you are, the cheaper your life insurance is. At the same time, you shouldn't buy it until you've determined that you truly need it. As an example, you've recently started a family.

While it may tempting to purchase the cheapest policy you can find, you ultimately want to work with an insurance company that’s financially sound. 

Work only with a company that has strong financial ratings from independent rating agencies like A.M. Best, Moody’s, and Standard & Poor’s. Ratings are usually provided by insurance companies on their website. But, you can always request company ratings from your life insurance agent.

Yes, you can. Usually, this is done when you amend your life insurance policy with your existing provider. For instance, buying additional life insurance to your current policy. It’s also possible to cancel your existing policy and find a better deal by finding another plan.

However, you should only do this when you have to. Examples would be if your family grows, you’re moved or remortgaged your home, or your property value has increased. Other circumstances would be if you paid off your home, you’ve found a cheaper policy, or you’ve changed your finanical strategy.

A life insurance policy that has cash value offers several options for allowing you to tap into its value while you’re still living;

• Withdrawing money from the policy
• Surrounding the policy
• Borrowing against the policy
• Using the policy to pay your premiums. 

“You might be allowed to withdraw money from a life insurance policy with cash value on a tax-free basis,” says John Egan for Experian. “However, if the sum you take out surpasses the amount of money you've built up as the cash value under your policy, you'll be required to pay income taxes on that money.”

The simplest answer? Take a look at your policy. In it, you’ll find the answer table which should contain a cash value chart. If you're still unclear about the cash value, contact your agent.

To save money on your premiums and keep them as affordable as possible, try the following;

• Buy it now. The older you are, the higher the premiums for the same coverage. Furthermore, as you delay, you run the risk of developing a serious health condition that may skyrocket your premiums, or even make you uninsurable.
• If you want permanent life but you're on a budget, consider some term for now. Purchasing some term life along with permanent life will allow you to save money initially. Once your budget increases, consider switching from a term to a permanent life policy.
• Consider group life insurance offered through your employer. It could be a relatively inexpensive option. Keep in mind that it’s possible that your group coverage will cease when you leave your job or become more expensive as you age.

You will have to take the exam if you apply for a traditional policy. There are, however, some companies that provide coverage of up to one million dollars without requiring an examination. Moreover, certain policies do not require you to take the exam, such as final expense insurance.

Why is an exam usually required? Well, you wouldn’t buy a car without test driving it first, right? 

Insurers are liable for thousands, sometimes even millions, if you die soon after obtaining the policy. As such, exams help them find out how risky you are to insure. Moreover, this ensures that individuals with terminal illnesses or who are otherwise likely to die soon can not get a policy.

A life insurance policy can only be purchased by someone who has an "insurable interest". As such, you can't insure your life with someone whom you just met on the street. Those who have an insurable interest include immediate family members. But, it’s also possible, in some circumstances, that your employer or business partner has an insurable interest.

Institutions or individuals who become your major creditors may also be entitled to insurance interest.

Short answer? No. 

When you purchase a life insurance policy on your own life, you become the policy's owner. As such, you have the right to name a beneficiary -- even if it’s an absolute stranger.

Because term policies last only for a specific period of time, insurance agents may refer to term insurance as "temporary." Don’t get worked up over this minute detail. In actuality, your homeowner's or auto insurance is probably no more "temporary" than that. 

Both of these types of policies cover you for a particular amount of time, and they must be renewed upon expiration.

A death benefit is paid by the insurance company when you die. The stated death benefit cannot be exceeded regardless of the amount of cash value in your policy at the time of your death.

Just note, your death benefit will be reduced by any loans you have not repaid (plus interest). In this case, your beneficiary may wind up receiving less than the policy's face value. There is an exception, however. There are some whole life policies that will cover both the death benefit and the cash value.

But, what if you outlive your term life insurance? If your policy expires, you won't get a refund for your premiums. But, once your term policy expires, you could convert it to a permanent policy.