Best Life Insurance for Everyone

Best Life Insurance for Everyone

You might have heard about life insurance a couple of times. Also, some of you may have ignored the concept assuming it is unnecessary. Once you know what it is and how enormously beneficial it is for you, you won’t resist getting an insurance policy right away. It gives security to the person for a lifetime, and even after he is gone. The family members are well supported financially according to the terms of policies. Keep reading to find out how excellent life insurance policies are! [1]

What is a life insurance policy?

It’s a contract that a person signs with an insurance company. You just need to regularly pay a premium amount to the company according to the policy you have signed. In return, the person gets financial security after he is gone, to support the family. The term is often also known as ‘Death benefit’.

Well, this is just one definition of a life insurance policy. One can go for buying life insurance according to the purpose and personal requirements.

Why is it necessary?

Meeting your financial goal in the presumed period is everybody’s wish. Along with death benefits, you get many other options to use a life insurance policy at its best. The most essential and popular policies are:

  • Covers financial expenses for a family member’ loss of life- This policy makes sure that the other members of the family are well supported financially.
  • House purchase
  • Children education
  • Children marriage
  • Pension post-retirement

The above list indicates financial goals one can achieve by using life insurance policies. The plans are flexible. However, there is no policy for purchasing a house; you can still do it by getting an endowment plan and pay for the house somewhere in future.

Types of Life Insurance

5 common policies out there for Life insurance are:

Whole life policy

This policy covers the person’s final expenses for his whole life. It doesn’t really have a validity date, so the policyholder is free to enjoy his life depending on the type of coverage he might receive.

Term insurance

The term life insurance is one of the most basic types of policies. You can get life cover but with no profits or savings. The premiums you need to give are cheap, and that’s why it is very affordable life insurance.

Endowment plans         

Endowment plans have the same properties as the term plans except for maturity benefit. The term insurance gives out an assured sum with profits only after the eventuality. On the other hand, endowment plans give the amount in both survival and death.

Money back policy

Money back policy is nothing but endowment plans’ variant. You can get payments at intervals over the policy term—an assured money amount is given periodically. And if the person survives the policy terms, he receives the rest of the assured money balance.

Unit linked insurance plan

Unit linked insurance plans, or ULIP, is another variant of the endowment plan. The policy pays the assured amount on maturity or death. In case the investment portfolio is greater, you will get that money instead. It is suitable for people who like to take the risk as ULIP majorly invest in stock markets.

How to know how much insurance you need?

Now that you know insurance is necessary, how much should you get for yourself? There is no magic formula to know the amount of insurance a person requires. It depends on many factors like financial condition and future expenses.

These three thumb rules of life insurance that will help you figure out your requirements. It is much better than a guess out of the blue. Numerically we can’t say it’s perfect, still one of the best calculators out there. The proven results, however, have made it worthy of giving a try.

The first rule of thumb

Multiply your total income by ten times. You need to build cash, so it makes a good amount when you multiply. Recently rising interest rates and economy make this rule quite outdated. It can work still; it doesn’t take consideration of family members, saving, and other expenses. Another thing is it doesn’t give any coverage for old age people who stay at home and don’t earn.

The credit that a stay-at-home parent provides is not permanent. It is meant to be substituted after death. The remaining parent will then get paid services like child care, that was free by a stay-at-home parent.

The second rule of thumb    

Set aside $100,000 for college expenses of your child.

People with children know the importance of insurance to pay for college. By using this formula, you can add another layer to the above rule. You can even pay heartily for your medical exam. Still, it excludes other important factors like assets, family needs, emergencies, etc.

The third rule of thumb: The Dime formula.

In the third, you can take an in-depth look at your finances compared to the two above. The abbreviation means:

  • Debt
  • Income
  • Mortgage
  • Education

It clearly states you should look at these four areas before you take any life insurance policy.

  • Debt and remaining expenses: Here, you can sum up all your debts other than the mortgage. Also, you can put a calculation of your funeral expense.
  •         Income: You can multiply your annual income with the number of years your family needs support.
  • Mortgage: Another critical factor is the calculation of the mortgage amount.
  • Education: Consider the expense you will be covering while your kids will be in school or colleges.

If you consider all these obligations in one go, you will get a much better and excellent result of your requirements. This method doesn’t cover savings and insurance plans you already have. Still, it is believed to be more comprehensive. Any unpaid contribution by a stay-at-home parent will not be considered as well.

Benefits of having a life insurance     

You must have an idea of universal life insurance by now. After the loss of a family member, other members get resources to carry on with their life. Advantages of the policy still differ depending on the coverage it offers.

Generally speaking, all kinds of life insurance can give financial confidence and security to your family. But also the more insurance policy you sign up for, greater benefits you will have for your family. For instance, a person may receive say 25000$ as insurance. It sounds good, theoretically, but if we look at reasonable expenses, it will be used to cover the funeral itself. In another case, a much broader coverage will give benefits for a longer time for your family.

  • Income replacement of lost salary
  • Repaying your debt like student loans, car loans and credit cards.
  • Paying home mortgages
  • Other obligations like taking care of aged parents

Several policies can give out other benefits rather than the amount of coverage too.

  1. You can get tax advantages, as death benefit payouts always come tax-free. Also, some policies let you transfer money with fewer tax liabilities to the heirs.
  2. Some policies work by the accumulation of cash value over time
  3. You can use this policy to pay the premiums later on, or you can have some retirement scheme that can get you going in old age.
  4. Various types of life insurance policies are often blended with other protection policies such as disability insurance.

What benefits do we get from different kinds of policies?       

The two basic kinds of life insurance policies are term insurance and permanent ones.

You just need to pay a specific premium amount in a term policy—for instance, 10 years. If a person dies during that period, beneficiaries will receive the death benefit. However, if the person is well and alive after the term is over, he must renew the policy or continue without it. On the other and whole life policy lasts for your entire life as it is a permanent life insurance

Benefits of term Life insurance

  • Suitable for low budget
  • Easy and simple to understand
  • Some term policies can be changed into a permanent policy. Make sure you know the facts before you get it.
  • If you want to discontinue for some reason, you can walk away. Only the premium amount already paid will be lost.

Benefits of whole life insurance

  • Contains cash value; that is an essential saving element. You can borrow this amount.
  • You can get estate planning benefits for tax
  • It is for long term with permanent coverage

Who should get life insurance?

While we all need insurance to guarantee the safety of our family when we are gone, just need to pay premium payments, and you are good to go for the whole policy duration. Here are some people’s examples who should consider getting it.

Adults owning a property together

If two people are holding property, and one of them dies, the other one would have to pay the loan taxes, mortgage, and upkeep on the property alone. For instance, a couple who purchases a house using a joint mortgage can get into trouble if they don’t have insurance.

Parents having minor children

In the case of a parent’s death, it can affect caregiving while going through financial hardship. Life insurance will provide enough financial resources to the kids and till they grow up and can support themselves.

Elderly who are willing to give their money to the children

People often take leave from their office to taking care of their elderly parents. You financially support the parents, and the life insurance will reimburse the child’s cost once the parents pass away.

Parents having special needs children

Children who need lifelong care can meet their needs with Life insurance if the parents pass away. You just need to make sure that premiums are paid regularly without a gap.

Married pensioners      

Pensioners are often given a choice to choose between spousal benefit for pension payout. Instead, they can accept full pension and then purchase life insurance for the benefit of the spouse.

Families who are not planning to afford a funeral

The family who suffer from the financial crisis more often are less likely to spend money on funerals. They can get a small Life insurance policy to honour the loved one instead of spending their money.

Business people and key employees

A manager of a company or a so when passes away creates a tough financial situation on the firm. The firm, therefore, often purchase life insurance for such an employee who is important for running the business.

 Wealthy families wanting to get rid of taxes     

Life insurance can effectively help cover taxes while maintaining the full estate value intact.

Common questions

Should I go for a term life insurance or a whole life policy?

It’s not very simple to answer this question as it depends on your requirement. Both policies offer a death benefit. However, there are many additional benefits and flexibility offered by whole life policy. But also it depends on the amount you can pay for the cost of life insurance. On the contrary, term life policies don’t give many benefits as that but are also fit for any budget.

How much insurance should I have?

There are many rules to help you determine the best policy for you. It is common for people to get a policy that covers other benefits to such as a mortgage, lost salary, other key expenses. So if you want a family and excellent protection for them, look for a policy that offers benefit in all aspects.

Is there Life insurance for seniors?

It is typical for life insurance to get expensive with age. Seniors get policies that is is only able to cover the funeral expenses, so it doesn’t burden their family. Rather than getting other products and services, one should consider life insurance, for better old age.

How to qualify for Life insurance?

Every company will, in-depth evaluate insurance applicant and find out his affordability for the policy. At least one of many companies will meet your needs and will issue the policy to you.

Many life insurance companies sell different policy size and multiple types of them that meet the specific needs of each individual. Whether it is for someone having a chronic health condition or someone who needs a way out of the heavy taxes, there is a policy for everyone. You can also contact a broker as they specialise in the field and know all about insurance companies—that where you can find the perfect insurance suitable for you.

Final words

So the bottom line is anyone can get life insurance if you find out hard enough till you get one. In the end, the healthy-looking and younger you are, the easier it’s for you to qualify for Life insurance. On the other hand, if you are less healthy and older, you will find the process much harder. If you are still unsure about it, just search for some life insurance quotes to get more motivation!