Life insurance is an important tool for protecting your loved ones. This article explains the basic concepts, types, and is intended to help you understand the ways it can help you.
Why buy life insurance?
There are many reasons for purchasing life insurance:
- Cover a mortgage or loan obligation.
- To provide for family members.
- Retirement planning.
- RI tax or estate strategy.
- Pay for funeral expenses.
- Meet requirements of a contractual agreement.
- For peace of mind.
How much life insurance do I need?
Work with an insurance advisor to help determine the amount of life insurance that is right for you. Consider financial obligations and goals. Include your personal and business obligations, if applicable.
How much life insurance can you afford?
When looking at options, make sure the policy is affordable long-term. If cost is a factor, determine what you can spend and back into the amount of life insurance that is available.
Make sure the insurance company is financially strong.
Changing life insurance companies is more challenging than changing car or homeowners insurance companies. Policies are written for up to 30 years. Make sure you research the financial strength of the life insurance company and consider it when selecting a policy. Some comparison tools include:
- M. Best Company
- Fitch Ratings
- Moody Investor Services
- Standard & Poor’s Insurance Ratings Services
These resources include company details in addition to financial strength.
Group life insurance is provided at work.
When considering group life insurance that you can purchase from your employer, keep in mind that you don’t fully control the policy. Research what happens if you change jobs, leaving Rhode Island. Ask about the procedure and cost of purchasing the policy if you leave the company. Does the price change? Can the policy be transferred to you? Can you keep the full amount of coverage that you have prior to leaving the company?
What are life insurance riders?
A rider is an add-on that provides supplemental benefits or extra coverage, for an additional fee. Each rider is for a specific situation. The most common riders are:
- Disability Income
- Waiver of Premium
- Guaranteed Insurability
- Term Conversion
- Accelerated Death Benefit
- Critical Illness
- Child Protection
- Accidental Death Benefit
- Family Income Benefit
- Return of Premium
- Cost of Living
What are the Types of Life Insurance?
The following includes a brief explanation of the different types of life insurance, in general teams:
Term Life Insurance: Provides a specific amount of life insurance for a fixed number of years. It can be purchased for a few years up to 30 years. This is the least expensive type of life insurance and the easiest to compare and understand. This policy ends when the term (number of years) is over.
Whole Life Insurance: Provides a specific amount of life insurance for as long as you pay the premium. It is a form of permanent life insurance, and it can accumulate cash value. You can borrow money from this policy. This is the most stable and the lowest risk of permanent types of life insurance.
Universal Life Insurance: This is also permanent insurance, however the amount of insurance and cash value can be increased or decreased after the policy starts. It can be changed to meet your changing situation, and you can borrow money from this type of life insurance. This type of policy provides flexibility.
Variable Life Insurance: This is another permanent insurance. The cash value and amount of insurance can vary based on investments. You can borrow money from this policy. This type of policy offers a variety of options and risk.
When is the best time to buy life insurance?
Two of the major factors that are used to calculate the cost and determine if you are eligible for life insurance are age and health.
The best time to buy life insurance is as soon as you can. You will never be as young as you are now and health issues become greater as we age.
Please note, this article was written in general terms. There are many variables and options within Term Life, Whole Life, Universal Life, and Variable Life insurance. Consult an insurance professional to discuss your specific situation as it relates to things discussed above.
Nancy Mendizabal, CIC
Apple Valley Insurance
Greenville, RI 02828
Apple Valley Insurance helps people and businesses with insurance needs. We are a locally owned independent business in RI that enjoys working with fellow small business owners, individuals and families. We serve all of Rhode Island and have many options, providing personal and business insurance programs. Contact us for a review or if you are concerned about having the right insurance coverage.