Life Insurance: How Does it Work?

life-insurance-companiesLife insurance provides a financial benefit to a listed beneficiary in the event that the policy holder dies. Individuals buy life insurance to cover their final funeral and burial expenses, to provide a survivor income stream to a designated beneficiary (spouse, children), to provide financial assets to a beneficiary for college education expenses within the future, to provide a legacy and to cover estate tax expenses.

While some life indemnity provides strictly a death benefit, other types offer the ability to accumulate cash value over time. To fully understand life insurance, you must first review the rudiments such as how much life insurance coverage you require, which types of life indemnity are appropriate and how to begin the underwriting process. While there is no magic number for how much life indemnity you may want to cover these several expenses upon your premature death, there are some general rules of thumb to consider. Most individuals begin through measuring their current financial condition; assets, liabilities, income and expenses. What when any final expenses do you anticipate having? What debts whenever any does your family currently have? Do you require providing for a survivor income stream?

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Consider the answers to each of the questions above if determining how much life insurance you may require. If you anticipate needing to provide a survivor income stream upon your premature death, be sure to consider a conservative annual interest rate for the capital, such as 4-6%, when deciding how much will be required to generate a long term income stream. Once you determine how much life indemnity you require for your financial goals and objectives, you will want to determine which of the four types of life insurance is most appropriate.

The Four Types of Life Insurance
There are four primary types of life insurance, term life, whole life, universal life and variable universal life. Each type of life insurance policy offers a miscellany of characteristics and gains which an individual should consider when determining which type and amount of reportage are most appropriate for their financial needs and goals.

The 4 primary types of life insurance are:

  • Term Life
  • Whole Life
  • Universal Life
  • Variable Universal Life

Term life insurance performs not offer a cash value benefit, while the other three types offer some form of a cash accumulation option. Consider the features and profits of each type of life insurance whenever selecting the type that best fits your financial goals and objectives as well as your household budget. Once you have decided how much reportage you require and the type of life indemnity that is most appropriate for your specific needs, you require locating a policy and beginning the underwriting process. Most indemnity companies will need you to complete a general medical and financial application as well as a brief physical examination.

Underwriters will review this information to determine whenever they can underwrite you for a life insurance policy. This entire process typically takes 3-6 weeks to complete. Once you have been approved, you will begin paying your ongoing premiums.

Need an insurance provider? Let us show you how to get the best rates for your policy.

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