Monday, June 21, 2010

Understanding the Basics of Life Insurance

For many of you, this is a distant discussion, decision, or even a worry. "I am healthy", "I don't have kids or family", "I can't afford anymore insurance", or "It only pays if I die".

Correct to all, and these are the exact Reasons it's TIME YOU establish a plan now vs. later.

For those that establish a plan, young & healthy, with cash build-up, there will come a time in your life whether it's a family, business strategies, or simple estate planning, that day you took the time to investigate further (maybe with the help of this post) was the day you made & saved hundreds of dollars, for yourself, spouse, family, or business.

There are many different types of plans, and for those who are experts in the in the financial planning business, many of them will tell you, life insurance is one of the most powerful financial planning vehicles available when used appropriately. That's our biggest problem, it's a complex insurance product, many times & often misunderstood, or used for the wrong reasons.

Things to ask your advisor:

1. What are the Ratings of the Company?

2. Show me an illustration with Hypothetical Returns of less than 7 & 6% over the life of the policy.

3. Does my Policy have Cash Value Build-up?

4. Is my yearly/monthly premium guaranteed so my policy won't lapse in the future?

5. Can you show me various company premium comparisons? (apples to apples)

6. How much should I be applying for? (always stay within your BUDGET-set a dollar amount aside monthly as a fixed expense towards your life insurance needs)

7. Should I buy term, whole life, variable life, universal life, variable universal life? And what are the differences?

8. Can cash my policy in, and what would be the disadvantages?

9. What if I become disabled & can't pay the premium?

10. Based on my current situation & future goals, how does life insurance fit into my financial plan?

Some call Life Insurance, Death Insurance, when the reality is there is so much more to Life Insurance Planning that isn't as easy as going out and just buying a policy, see how many signatures & pages you must fill out to apply...then you will understand how serious of a subject it really is.

1. Life insurance correctly planned will on premature death provide funds to deal with monies due, mortgages, and living expenses. It offers protection to the family you leave behind and serves as a cash resource.

2. It secures your hard earned estate on death by providing tax free cash which can be utilized to pay estate and death duties and to tide over business and personal expenses.

3. Life insurance can have a savings or pension component that provides for you during retirement.

4. Some policies have riders like coverage of critical illness or term insurance for the children or spouse. There are certain rules regarding eligibility for riders which you will need to determine clearly.

5. Having a valid insurance policy is considered as financial assets which improves your credit rating when you need health insurance or a home loan or business loan.

6. In case of bankruptcy, the cash value as well as death benefits of an insurance policy is exempt from creditors.

7. Life insurance can be planned such that it will cover even your funeral expenses.

8. Term life insurance has double benefits, it protects and you can get your money back during strategic points in your life.

9. Insurance protects your business from financial loss or any liabilities in case a business partner dies.

10. It can contribute towards maintaining a family's life style when one contributing partner suddenly dies

There are many other questions to ask, but these are the basics, should you want to know more information or have questions feel free to