What is life insurance?
Life insurance can be one of the most difficult insurance coverages to discuss with your insurance agent. Typically when one thinks about life insurance they have experienced a loss or have seen someone else lose a loved one, friend or company owner. A recent survey showed that 9 in 10 Americans agree that most people need life insurance, but the truth is just 60% said they have it. Another survey states 86% of Americans haven’t purchased life insurance because it’s too expensive, yet those same people over estimated its true cost by 2 times its actual expense. Life insurance can fund many expenses such as, funeral cost, mortgage, car loans, taxes, estate cost and credit card debit. It is often used toward future or upcoming expenses such as, clothing, food, utilities, housing, college and retirement.
Ways to purchase life insurance
The three ways to purchase life insurance are direct, through work and an insurance agent. There are advantages and disadvantages to the way you purchase life insurance and how your situation can affect your desired needs/coverages. Unless you are well versed in insurance, it’s typically best for you and your family to speak with an insurance agent. They can guide and assist you throughout the process by making sure you understand all the coverages and then offer you life insurance coverages to meet your specific needs.
Types of life insurance
There are several options when it comes to the types of life insurance available to meet your needs. Term life insurance policies are designed to provide coverage for a specific time frame – 5, 10, 15, 20, and 30 year policy terms are common. They are usually written because of price and to meet a time obligation such as a mortgage, student loan, key man, buy-sell agreements or other personal or business debts. Other types of life insurance exist as well. The most popular styles of permanent life insurance policies are whole life and universal life. With whole life policies the premiums remain the same for the life of the policy and the death benefit and the value rate on your cash value are guaranteed. Universal life insurance characteristics are made up of flexible premiums, face/coverage amounts, and pricing structures. Universal life can build cash value, which does earn interest rate that can vary overtime, and it’s usually guaranteed not to fall below a certain rate. Long-term care insurance is another type of insurance that falls into the life insurance category. This type of coverage is designed to cover both a home healthcare aide as well as any nursing home care costs as well. The cost of both can be quite shocking: home health care aides average around $19 per hour and coverage for a full-time private room at the nursing home is approximately $84,000 per year average. Long-term care services are not only for the elderly anymore. The statistics show that 40% of the patients receiving care are under the age 65.
Other important notes
One thing that’s important to consider when considering life insurance is the fact that the younger you are when purchasing the coverage, the more affordable it usually is. Disability insurance is another coverage designed to protect you in the event you are unable to work. In the US today, 50% of Americans couldn’t meet their expenses after just one month without a paycheck. Disability insurance acts as a policy to insure your paycheck. This coverage is to cover you in the event you are unable to work because of illness or injury. There are two types of disability policies, short term and long term. Typically, the number of days you have for the waiting period (deductible) for the coverage to kick in and start paying you determines which coverage you have. You can buy this coverage as an individual as well.