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Life.gif (30489 bytes) Life Insurance

Introduction                                                      

In general, life insurance is something we prefer not to think or talk about. It is never easy to think or talk about our mortality. However, it is also important to remember that life insurance was designed to provide financial protection for the ones we love and want to keep protecting after our demise. Therefore, it should be seen as one of the most important and most caring of all insurance policies, since it provides a lump-sum payment to your loved ones at time when they need it most.

The information provided below, together with the glossary should help you gain a better understanding of the different types of life insurance policies and terms used. It should also help you determine which life insurance policy best serves your needs, as well as answer most other questions you may have about life insurance. However, if you still have unanswered questions, or need the guidance of a life insurance professional, feel free to call call us "Toll-Free" at 1 (888) 736-3417.

What is Life Insurance, and Do I Need It?

Life insurance is mainly designed to provide financial protection for those dependent upon the insured person in the event of that person's death. However, it can also be used to cover funeral expenses, to pay-off a mortgage, to pay estate taxes, to cover college costs or to accumulate cash for college or retirement. In certain cases life insurance can be requested by a court of law as part of a divorce settlement.

There are three basic types of life insurance policies: 1) term,  2) universal life, and 3) whole life. Term insurance only offers pure protection (i.e. death benefit only), while universal and whole life policies combine a death benefit with a cash value, which is generally accessible through policy loans.

Term Life Insurance
Term life insurance is "pure" insurance -- it pays a death benefit to the designated beneficiary or beneficiaries if the insured person dies during the term of the policy, but does not build any cash value. Term insurance offers the greatest amount of coverage at the lowest premium, thereby making it the most affordable and most popular of all life insurance policies. Term insurance provides protection for a set period of time, usually 30 years or less. Term policies can have a "level" death benefit which does not change, or a "decreasing" death benefit which decreases annually. The latter is mainly used for mortgage life insurance.

Why Consider Term Life Insurance?

Affordable coverage.
Temporary need for a large amount of coverage
To preserve your family's lifestyle in the event of your death.
To give your loved ones a mortgage-free home and pay-off debts
So that your children  will have enough money for a college education
To cover funeral expenses and unpaid medical bills

Universal Life Insurance
Universal life insurance was introduced during the early 1980's as an alternative to whole life and term insurance, both of which have been in existence for more than a century. This type of policy is often referred to as flexible-premium life, because premiums can be adjusted up or down during the term of the policy, or even halted for a certain length of time, while keeping the coverage in effect. Generally, the policy fee and the mortality cost (i.e. cost of insurance) are deducted from the cash value on a monthly basis. The remaining cash balance continues to earn interest on a tax-deferred basis. The credited interest rate  changes annually, but cannot fall below the minimum rate specified in the policy. A detailed policy statement is sent to the policyholder on each anniversary.

Whole Life Insurance
Also called ordinary life insurance, this type of policy is the most permanent, and charges the highest premiums of all life insurance policies. Unlike universal life, premiums are fixed, but the policy can be paid-up in a few years, or with a single premium. In addition to paying a fixed benefit upon the death of the insured person, it also allows you to build up cash value which you can borrow against. Any loans outstanding when the insured dies are deducted from the death benefit payable to the beneficiary or beneficiaries. Whole-life policies also accumulate cash values on a tax-deferred basis.

Why Consider Policies such as Universal Life or Whole Life?

To preserve your family's lifestyle in the event of your death.
To cover funeral and related expenses.
To cover your estate taxes, which are due within 9 months after death.
To leave an inheritance for your children.
To pay for college expenses with tax-advantaged means of borrowing against the policy.
To supplement retirement income with tax-advantaged means of borrowing against the policy.

How Much Life Insurance Do You Need?

Once you've decided that you need life insurance, you'll need to determine the amount of coverage you need. That, of course, is a very personal decision. But as a rule of thumb, your death benefit amount should be five to eight times your annual earned income. In determining what is best for you, you may also want to consider other obligations you may have and whether or not you want to have them completely or partially paid off upon your death. Such expenses include your mortgage, outstanding debts and future college expenses for your children. Current tuition costs for a 4 year public university are running about $7,000 per year while  private institutions are running around $16,500 per year. When estimating future college expenses be sure to factor in annual inflation. To further help you determine the amount of coverage you need, you may want to review the "California Life Insurance Buyer's Guide", which was prepared by the National Association of Insurance commissioners.

How do I get a "Free Quote" on Life Insurance?

To receive a free quote, simply click on the button immediately below this paragraph, then complete the form that appears on your screen while following the instructions on the form. You can also request a quote for you spouse on the same form. Requesting a free quote does not place you under any obligation.

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For More Information Contact:

Henry Best Insurance Services
25820 Tennyson Lane, Stevenson Ranch, CA 91381
Tel: (818) 613-5380 in Los Angeles
Tel: (888) 736-3417 "Toll-Free" outside Los Angeles
FAX: (661) 284-3520

email: info@yourinsurancestore.com

 

Raonbow Line.gif (4491 bytes)

For More Information Contact:

Henry Best Insurance Services
25820 Tennyson Lane, Stevenson Ranch, CA 91381
Tel: (818) 613-5380
FAX: (661) 284-3520

email: info@yourinsurancestore.com

Send E-mail to hbest@yourinsurancestore.com with questions or comments about this website.

Copyright 1998-2003 Henry Best Insurance Services
Last modified:  November 11, 2003