Life Insurance Explained

Today it's quick and easy to compare fast, free life insurance quotes online.

However, it's important to understand your options when it comes to life insurance. Life insurance provides affordable security and protection for you and your family in case you are not there to provide for them.

This page provides information that will assist you in understanding life insurance and help you to make a well-informed decision in choosing the right life insurance to meet your personal needs.

Life Insurance is a binding contractual agreement between a life insurance company and an insured person that usually protects those who are financially dependent on the insured person.

The agreement between the insurance company and the insured, known as the life insurance policy, provides details and conditions about who should receive the cash payment in the event of the insured’s death.

• Term Life Insurance
  
• Term Life Insurance with No Medical Exam Required
  
• Whole Life Insurance
  
• Childrens Life Insurance
  
• Senior Life Insurance
  
• Smokers Life Insurance
  
• Accidental Life Insurance
  
• Guaranteed Issue Life Insurance
  
• Burial Life Insurance

Depending on your age, lifestyle, or your place in life (i.e. starting a family), life insurance needs vary from person to person, and usually change over time. When determining your personal life insurance needs, there are several factors you should take into consideration, including:

• Final Expenses - Funeral, burial, hospital and doctor bills.
  
• Taxes - Estate and inheritance taxes.
  
• Bereavement - A monetary cushion for your family’s immediate needs until the family has a chance to adjust to their life without the insured.
  
• Supplemental Income - Maintains the family’s existing living expenses and bills, and may include the payment of recently incurred bills as a result of a spouse’s death, such as daycare, maid, etc.
  
• Retirement - Ensures your spouse’s ability to retire comfortably.

Regardless of if you have dependents, there are many benefits to buying a life insurance policy. It ensures those left behind in the event of your death do not incur any unexpected expenses such as your funeral costs (average $7,000) or outstanding debt (from student loans, credit cards, mortgage, auto, etc.). Life insurance can also assist you with estate planning, taxes, and even preparing for supplemental income for your spouse during their retirement years.

Today it is common for employers to offer some type of life insurance to their employees as part of their employee benefit plan. In addition, many companies use life insurance to protect themselves against any type of unforeseen circumstances that might impede the success of their business. Sometimes businesses will insure a Key Person – someone whose loss of life would greatly affect the financial well being of the company through loss of profits and/or unpaid business debts. Or, they might use life insurance benefits to ensure a Business Continuation that establishes a Buy/Sell Agreement by assigning the business interest of the deceased partner to an able partner or group of employees.

A beneficiary is the person(s) or entity selected by the policyholder to whom the benefits are paid in the event of the insured’s death. The insured can assign multiple beneficiaries and has the power to determine how the proceeds are divided. The insured usually maintains the right to change the beneficiary(ies) at any time.

The settlement option in the life insurance policy allows the insured to designate how the death benefit should be paid to the beneficiary in the event of the insured’s death. Or, the insured could choose to let the beneficiary select the settlement option. The list of settlement options include:

• Lump Sum Payment
  
• Fixed Period Payments
  
• Life Income
  
• Interest Payments
  
• Fixed Installments
  
• Single Premium Annuity

Term life insurance is usually for people with short term needs (approximately 20 to 30 years). Permanent life insurance is for long term needs or for life. For example, a person may consider term life insurance while they are supporting a young family. Other people may choose permanent life insurance when preparing for retirement. In many cases, people choose to buy both types of policies to ensure coverage for all of their needs. We strongly recommend term life insurance when funds are limited and the amount of life insurance needed cannot be afforded with a permanent life insurance policy.

Shop and Compare multiple Life Insurance quotes for free.

Depending on the life insurance company, life insurance policies offer several free and additional options and riders. Things you may want to consider when choosing the best life insurance policy for you and your family include:

• Convertibility - Does the insurance company allow the insured of a term life insurance policy to convert the policy to a permanent life insurance policy without evidence of insurability?
  
• ROP Rider or Return of Premium Rider - Often for a small additional cost this rider will return all or a portion of your premiums paid, if the insured outlives the policy term.
  
• Discounts - Does the life insurance company offer any special discounts when two life insurance policies are purchased at the same time to cover a husband and wife or two business partners?
  
• Child Rider - Do you want to add your child or children to the life insurance policy.
  
• Accidental Death Benefit - If you die by accidental means do you want an additional death benefit to be paid?
  
• Guaranteed Purchase - Would you like the option to purchase additional life insurance in the future without proof of insurability?
  
• Waiver of Premium - If you become disabled, do you want the insurance company to waive your insurance premiums?
  
• Accelerated Death Benefit - If diagnosed as terminally ill, will the insurance company accelerate the availability of the death benefit?

Once you decide to purchase life insurance, you will be required to submit an application, you may need to disclose all or some of your medical history, and sometimes undergo a medical examination scheduled and paid for by the insurance company.

Once the life insurance policy has been issued and you have paid your first month’s premium, your coverage will begin immediately, with most insurance companies.

Life insurance premiums are determined by the underwriter based on your risk classification. Your risk classification is determined by a number of factors such as personal and family medical history, financial situation, age, gender, recreational activities, and vocation.

If paid in the form of a lump sum, the proceeds collected from a life insurance death benefit are usually exempt from income taxation. However, if the settlement is paid using another settlement option, then the interest earned on the principal death benefit can be taxed. Also, the proceeds from a death benefit can be subject to estate and inheritance taxes. Save up to 75% on Term Life Insurance!

Find out where to get the best term life insurance quotes online.