LIFE INSURANCE
Life Brands
Do I need a Life Insurance?

The main purpose of life Insurance is to ensure that your immediate family has financial support in the event of your death. However, not everyone needs life insurance. Life Insurance proceeds are a handy source of cash to pay the deceased’s debts, funeral expenses, and replace missing income. So, people who have no minor children or financial obligations really don’t need life insurance.

The general rule is that you only need life insurance if you have dependents. Typically, dependents are children who still live at home or have yet to graduate from college. But a dependent could be anyone who is financially dependent on you, adult child, spouse, sibling, or an aging parent.

There are additional purposes of life insurance such as to build retirement savings, assist with long-term care expenses, and provide funds for catastrophic illness.

Coverage Types
When you buy a term life policy, an insurance company promises that it will pay your beneficiaries a set amount, if you die during the policy’s term. In exchange, you pay a monthly premium to the company for the duration of that term.

 

These terms are usually 5, 10, 15, 20, or more years. Some term carriers are offering living benefit options.
Permanent Life
Permanent life insurance refers to a set of life insurance policies that provide coverage for your entire lifespan, so long as premiums are paid. So, whether you pass away immediately after purchasing coverage or 50 years later, your beneficiaries would receive a death benefit.

 

There are several types of permanent life that can be combined with additional benefits that term life plans do not have.

RIDERS

What are riders?

Riders are optional, additional terms and conditions that go into force along with the rest of the policy to help customize to your specific needs. Each add-on rider may increase your premium, but they include benefits on top of normal life insurance coverage. Here are the most common life insurance riders:

Guaranteed Insurability Rider

This rider allows you to purchase additional insurance coverage in the stated period without the need for further medical examination. This rider is most beneficial when there has been a significant change in your life circumstances, such the birth of your child, marriage or an increase in your income. If your health declines with age, you will be able to apply for extra coverage without giving any evidence of insurability. 

Accidental Death or Double Indemnity Rider

This rider pays out an additional benefit amount if insured dies as the result of an accident. Normally, the additional benefit paid out upon death due to accident is equivalent to the face amount of the original policy, which doubles the benefit.

Waiver of Premium Rider (recommend)

Under this rider, future premiums are waived if the insured becomes permanently disabled or loses his or her income as a result of injury or illness prior to a specified age. Disability of the main breadwinner can have a crippling effect on a family. In these circumstances, this rider exempts the insured from paying the premium due on the base policy until he or she is ready to work again. This rider can be valuable, particularly when the premium on the policy is quite high. The definition of the term “totally disabled” may vary from one insurer to another, so be aware of the terms and conditions of your specific rider.

Family Income Benefit Rider (strongly recommend)

This rider pays out an additional benefit amount if insured dies as the result of an accident. Normally, the additional benefit paid out upon death due to accident is equivalent to the face amount of the original policy, which doubles the benefit.

Living needs Rider (strongly recommend)

Under this rider, an insured person can use a portion of the death benefits if he or she is diagnosed with a terminal illness that will considerably shorten the insured’s lifespan. On average, insurers advance up to 50% of the death benefit of the base policy to the insured. Insurance companies may subtract the amount you receive, plus interest, from you’re your beneficiaries receive on your death. Insurers have different definitions of “terminal illness,” so check what the rider covers before purchasing it.

Child Term Rider (recommend)

This rider provides a death benefit in case a child dies before a specified age. After the child attains maturity, the term plan can be converted into permanent insurance with coverage up to five times the original amount without the need for medical exams. Small amounts such as $10,000 to $25,000 are recommended.

Chronic (or Long-Term Care) Rider (strongly recommend)

In the event the insured needs stay at a nursing home or receive home care, this rider offers monthly payments. Although a separate LTC policy can be bought individually, this can be an effective way to pay for care. Plus if the LTC benefits are not used, the death benefit still goes to the beneficiary.

Return of Premium Rider

Under this rider, you pay a higher term insurance premium and at the end of the term, your premiums are returned to you in full. In the event of death, your beneficiaries will receive the paid premium amount.

The Right Fit
Getting life insurance is a lot like getting fitted for a suit. In addition to the overall objectives of the policy there are many individual factors to consider including your health conditions, BMI, hazardous activities, finances, age, and gender.

 

Therefore, most of life insurance applications go through an underwriting process to make sure that all relevant factors are evaluated before a final rate is offered and a policy is issued.