The idea behind life insurance!
If you are the major income earner in your household and have dependents, it is wise to consider buying life insurance so that your loved ones whom you point as beneficiaries in your life insurance policy, can be well provided in the event of your untimely death.
If you have any debts, mortgages, and loans, your loved ones will be liable for them when you pass away. Life insurance can help them cover these debts, especially if there is not enough cash in their savings. One major advantage of Life insurance to savings is the fact that life insurance will be available to your loved ones much faster in the form of a tax-free lump sum.
As we grow old, our health condition changes and it is by human nature that our body grows weaker and we develop some health conditions which make obtaining life insurance much more difficult and more expensive. An older age life insurance premiums are generally higher, and if an individual has a serious condition, they might not be eligible for life insurance or be eligible for a small face amount. Therefore, it makes sense to buy life insurance at a younger age. As it has been said, money does not buy life insurance, health does. Buying life insurance early can save you as much as 75%.
Types of life insurance
Generally, there are two types of life insurance, temporary (term) and permanent and there is a massive cost difference between the two of them. Both types are very useful and powerful products if they are used correctly. Life insurance is a need, everyone with dependents and liabilities must have it. However, each person needs a different coverage amount, for a specific period, so their life insurance policy must be structured accordingly.
Typically, a term life insurance policy entails that you pay a premium for a predetermined amount of time and amount. This can be for 10, 20, or 40 years and if you die within that period your beneficiaries are paid out. With term life insurance, you can pick how many years you want to have coverage; therefore, you can choose the policy period with respect to your actual needs.
Since term life insurance serves such a specific purpose it gives you peace of mind when you need it most, so you can cover your liabilities and protect your loved ones at a reasonable and affordable cost.
Permanent life insurance
With permanent life insurance, you have lifelong protection for as long as you continue to pay your premiums and their age limit is 120. Permanent life insurance also allows you to pay off the policy in 10 to 20 years and it will stay in force for life.
It also gives you the ability to accumulate cash and to invest it and let it grow tax-free. You only pay tax when you withdraw the money, but you have the option of potentially using the accumulated cash tax-free.
You can borrow against permanent life insurance if the need arises or receive some of the death benefits earlier if needed for a medical condition.
If you have already made contributions to other tax-reducing accounts like an RRSP, TFSA, and RESP and still have savings, then your financial adviser might recommend that you consider getting permanent life insurance.
Permanent life insurance is an investment vehicle for savings that you don’t need and it will ensure that you can leave your beneficiaries a substantial amount of money.
Your health and life insurance
Depending on the type of life insurance, face amount, age, and health condition, it will determine if you need to have a medical examination in order to obtain life insurance coverage. In most cases, insurers will approve the insured immediately if the face amount is lower than $500k (in some cases up to 1 million) and if the individual is under 50 years of age and in good health condition.
On the other hand, if the individual does not belong to that category, the latest trend where people take out policies that are immediately available may not require a medical examination. However, these can be more expensive and have other drawbacks that include a non-renewable clause or are not convertible.
The traditional process requires that you fill in a health questionnaire that will determine how big of a risk you are and you will need to have a medical examination. This will determine which pricing tier you fall under.
What’s the deal with paid-up life insurance policies?
There are typically two types of paid-up life insurance policies. A permanent insurance policy can be paid-up in order to keep it in force but to stop paying premiums. Your family will still receive a portion of the original death benefit and is a better option than letting your policy lapse. However, in some cases, the premium is deducted from your cash value account and that is why the death benefit decreases.
If you opt for paid-up additions then that means that you use the dividends of your policy to purchase additional coverage. This helps to grow the cash value of the policy. These offer liquidity and growth that is tax-friendly and safe.
Paid-up life insurances are generally more expensive; however, if you have the financial means to pay for them, it is very beneficial to do so, as they provide coverage for life and you are not required to pay as long as you live.
Deciding on the life insurance that you need
You will need to calculate what expenses you currently have and that your family will need to cover on your death. This must include any loan repayments, funeral costs, tuition fees, and other ongoing expenses. This might be confusing and overwhelming at times. For instance, how many years of expenses should my life insurance cover, or what should I do as my liabilities decrease? For ongoing expenses most experts suggest five years of lost income, and if liabilities are decreased so can your insurance coverage which will result in a lower premium.
Also note that you do not have to calculate all of your needs yourself, ask your financial advisor to calculate them for you, and explain the calculation. This way you can rest assured that you have enough coverage, no more, no less.
Deciding who your beneficiaries will be
Usually, your spouse or your kids will be your beneficiaries; however, you can name anyone that you want as your beneficiary, just make sure that the name and personal detail are correct. Otherwise, you might want to name someone that you trust to care for your dependents when you are no longer around. If your children are minors, consider that if you make them the beneficiaries the courts will have to appoint a guardian, a process that often takes longer. It’s best to set up a life insurance trust and appoint someone you trust as your trustee.
How can I be sure that I am getting the right life insurance policy?
An expert advisor is the best person to help you secure your family’s financial future and guide you to find the best type of life insurance. A financial advisor or insurance agent will assess your financial needs, look at the existing life insurance policies you may have, then they will find a way to cover all your life insurance needs within your budget.
Finding the right Life insurance policy with the proper coverage amount at the right price is complicated and overwhelming. Our expert advisers are fully qualified to help you work out the coverage that will meet the needs of your family. By taking your age, and health, liabilities, and goals into consideration. At Apluswealth, you can get a quote, compare quotes and find the life insurance quote you feel comfortable with. Our life insurance advisors will provide you with quotations and the most suitable policy types.
Contact our expert advisers today and find out which is the best life insurance for you.
Email: Contact@apluswealth.com
Tel: +1-888-461-6120