Life insurance can be an uncomfortable topic to talk about, but it is important to address the subject sooner rather than later. If you have dependents, life insurance should be a key aspect of your financial planning as you will want to make sure that your dependents are provided for in the case of unexpected illness or death.
Let’s have a closer look at what life insurance is and why you need to consider it.
What is Personal Life Insurance?
In a nutshell, life insurance is paid in the event of an accident, injury or death and is used to cover existing debts as well as to provide for your family in your absence. It can also be used:
- To resolve debts such as personal loans, home loans, and credit card payments.
- To guarantee income or capital for a business in case a shareholder passes away.
- To provide regular income to dependants for expenses such as living expenses, bills, school fees or child care.
What Type of Life Insurance is for Me?
That depends on what you plan to save for. In general, there are five different categories of life insurance policies for you to choose from:
1. Term Life Insurance
In a nutshell, term life insurance provides a fixed lump sum that is paid in the event of the life insured’s death. Term life insurance is generally used to provide debt elimination and as an income replacement mechanism for the covered person.
In other words, in the event of death, the beneficiaries of the policy will be given a fixed amount of money to pay for the funeral cover, education of dependents, and mortgages. A positive aspect of this level of insurance is that it is inflation-protected, meaning that the payout amount will increase each year.
Once this type of policy is in force, it can only be canceled at the life insured’s written request, or by non-payment of the premiums.
2. Living Trauma Insurance
As the name implies, living trauma insurance covers you should you become seriously ill. Although the illnesses and ailments covered will differ from policy to policy, they do generally tend to cover cancer, strokes and heart conditions.
Living trauma insurance policies will cover between 40-60 predefined ailments so it is recommended that you compare policies before choosing one. The definitions of each ailment can and do vary between insurance companies, so it is very important that you review these definitions, or at least talk to someone who can do it for you.
The insurance will be paid as a single lump sum, which means that you are able to continue with mortgage repayments, household living commitments, and other expenses while you recover.
One of the main benefits of a living trauma life insurance policy is that you can still receive a benefit even if you can continue working while being treated. There is no requirement to be absent from work to qualify for a payment. The payment is generally received tax-free.
3. Income Protection Insurance
Income protection insurance is designed to provide you with a monthly income stream if accident, injury or illness prevents you from going to work. Income protection benefits are paid on a monthly basis which in turn allows you to continue living to your normal standards while you are off work.
While you may benefit from sick leave benefits, income protection insurance comes into its own when that sick leave runs out. It means that you can continue to put food on the table, petrol in your car and pay for your mortgage.
This is arguably one of the most important forms of insurance as it provides a safety net for you and your family.
Income Protection insurance has many different components that can and do affect the premium that you pay. It is not as straight forward as just deciding on the quantum of cover, like Life, TPD or Trauma.
Factors like wait periods, benefit periods, stepped vs level structure, indemnity vs agreed value and a host of other factors need to be considered, which makes Income Protection difficult to compare against each other.
4. Business Overhead Insurance
As the name suggests, business overhead insurance is designed to protect your business in the form of monthly reimbursements should you be incapacitated due to illness or injury. Business overhead insurance lasts for a maximum period of 12 months and can be used to pay business-related expenses including rentals, salaries, superannuation, and maintenance.
To qualify for this form of insurance, you need to be a legal business owner.
5. TPD (Total and Permanent Disability) Insurance
If a serious accident, injury or illness prevents you from ever working again, TPD insurance is a lump sum benefit that will help you pay for your living expenses and rehabilitation expenses. That being said, TPD benefits are not paid out as soon as the illness is contracted.
Instead, the illness or injury has to affect your way of living for a 3–6 month period before your insurer decides that you are physically unable to work and are thus eligible for the benefits.
As is the case with most insurance policies, TPD insurance premiums take your age, lifestyle, gender, and occupation into account. Manual workers are considered a higher risk than office workers and as such, should be expected to pay more for the same policy.
When is the best time to take out an insurance policy?
If you have a family and dependents, it is recommended that you consider taking out a life insurance policy as soon as you can. Having life insurance gives you that all-important peace of mind as your family will never be left wanting in your absence.
You may be fit and healthy right now, but as we all know, life has a habit of sneaking up on us and surprising us with unplanned events, so it is best not to wait until your health declines.
Few Interesting Points To Know in Life Insurance
Relevant life insurance is comparatively a newcomer in the insurance industry. This new type of insurance has been specifically designed for businesses and organizations that have a limited number of employees and are not eligible for group life schemes.
It is also known as a death-in-service benefit which is particularly tailored for high-income individuals. People with hefty salaries find this to be an effective insurance choice since the benefits received in the event of their death are not taken into consideration while their lifetime pension allowance is computed.
How does a relevant life insurance policy work?
A relevant life cover is a unique way of offering death-in-service benefit to high-earning employees on an individual basis. Under this cover, a one-time amount is paid to the beneficiaries of the insured if he dies or is diagnosed with a critical illness during his employment. This is not categorized as a ‘benefit in kind’ and therefore, the premium is not taxable. If the benefit is distributed via a discretionary trust, no inheritance tax is imposed on it. The employer makes the payment for the premium on the cover on behalf of the insured and since this is not a benefit in kind, they are not taxed under the income tax regulations. This leads to a considerable amount of saving for a taxpayer.
Who can go for relevant life insurance policies?
The following entities find this policy to be appropriate for their insurance needs:
- Small businesses which are not staffed with a sufficient number of workers to deserve a group life plan.
- Directors of a company who wish their employer to finance their life insurance costs and counterbalance the premiums against corporation tax.
- Directors and employees with high income or who have sizeable pension funds and do not wish that the benefits received by them are included in their lifetime allowances. However, this is subject to a maximum limit of annual income worth £1.5 million.
- Small limited company directors who are contemplating setting a Key Person cover ready with the intention that their employer makes the payment on the premiums of their policy.
Relevant life insurance is not appropriate for equity partners or self-employed individuals. However, they can use this to cover their workforce.
Is there any limitation to the relevant life cover?
There are certain tax exemptions under corporation tax when a relevant life policy is set up by your employer. There are certain criteria that have to be met for getting these exemptions as well and they are as follows:
- Only death and critical illness benefits can be offered.
- The benefits have to be disbursed as a one-time amount before the insured person reaches the age of 75 years.
- There is no surrender value for this cover.
- Family members and dependants can only be beneficiaries of this cover.
- Benefits have to be distributed via a discretionary trust.
3 Ways To Get Life Insurance When You Are High Risk
It’s always best to buy a life insurance policy while you’re young and healthy, but many don’t even consider their own demise until a serious health problem takes root. Discouragement sets in when they assume that no insurance provider will give them a second glance. In reality, a health problem doesn’t necessarily lead to a rejected application.
Don’t worry that a health issue could block your ability to get quality life insurance to financially protect your family after you’re gone. You may have to work a little harder than someone who has perfect health, but in the long run, it’s worth the effort.
Each insurance company is unique. If you’re rejected by one insurer, that doesn’t necessarily mean that you will be turned away by another. Each one will look at your situation and judge the circumstances in different ways.
Find a High Risk Insurance Specialist
There are agents who specialize in “high risk” cases. When you find an agent, especially one that is an expert in your particular health risk, you will be more likely to get the highest death benefit with the lowest premiums.
Use an internet search engine to find a high-risk life insurance specialist. Search for your specific needs by searching for “life insurance for cancer patients” or “life insurance for those with heart disease”. These agents’ knowledge and expertise will save you time and reduce the stress of this overwhelming task.
Get Your Disease Under Control and Comply With Orders
Have you been diagnosed with high blood pressure and consistently show signs of hypertension without a normal range in sight? Do you have type 2 diabetes, but never get that blood sugar under control? Insurance companies are more likely to reject your application if you can’t prove that you have your disease under control.
Has your doctor told you to get a blood test, but you keep putting it off? Has she put you on medication that you never take? Were you referred to a specialist and never got around to going? These are some examples of non-compliance, which can easily lead to rejection.
Believe it or not, lack of control over your health problems and non-compliance with your doctor’s orders are common reasons for being declined. If you have a serious health issue, that’s one thing. But it looks much worse if you’re not taking proper measures to prolong your life.
Look for Trial Offers
Getting an accurate insurance quote can be tricky when you have health problems. As a result, trial offers help streamline the process and give you a glimpse into what you can expect when you fully apply for a policy.
In order to obtain a trial offer, your insurance agent sends a detailed account of your health information to any relevant companies. The potential insurers review your information and send back offers with rates and coverages. Your agent sends a formal application for the best offer and attaches the company’s trial offer. As long as all of the submitted information is correct and nothing changes when you get your medical exam, you’ll receive the quoted offer after you apply.
If you have a medical condition that you think will keep you from obtaining life insurance, don’t give up! There are agents who can help you get the benefits you need to take care of your family when you’re gone.
When to Re-evaluate Your Life Insurance Needs
Life insurance is one of those things that no one wants to talk about, but that everyone needs. Like other forms of insurance, life insurance needs change but most people don’t think about checking their policy to see if it still fits their needs.
Just like car and home insurance, life insurance needs change throughout life and should be managed like other insurance policies.
For most people, though, knowing when to re-evaluate your life insurance needs is a big unknown. While a general rule of thumb is that when you experience a major life change, you should re-evaluate your life insurance.
While “major life change” can mean different things to different people, some events are universal life changing and should definitely trigger an insurance evaluation.
Marriage or Divorce
Marriage is automatically one of those events that should make both partners begin to think about life insurance. Most insurance agents recommend that both partners have a life insurance policy even if one plans on staying at home. During a divorce, one of the things that usually neither partner thinks about is life.
As a part of your divorce planning, one should look at their life insurance policy to see if they need more, less, or different coverage. At the very least, the beneficiary should be changed from your ex-spouse to a child or family member so you are certain, should something happen, that your policy pays out to the person of your choice.
Addition of children
With every birth or adoption, parents should re-evaluate their life insurance policies and needs. As the size of your family changes, so do your life insurance needs. Remember, life insurance is to help take care of the policy holder’s family should s/he die.
Larger families need more money to meet daily living expenses. In addition to births and adoptions, parents should re-evaluate life insurance if two families are blended by marriage.
While each parent may have life insurance, more might be needed if the surviving spouse will be taking care of all the children, not just their biological ones. As children are brought into the family, parents should consider purchasing a life insurance policy for children in order to give that child financial security and to secure future insurability.
Should parents decide to divorce, it can be written into the decree that each parent will keep a life insurance policy with the child as the beneficiary in order to help secure the child’s future financial solvency.
Buying or selling a home
Home ownership is a major financial responsibility and affects all parts of the buyer or seller’s life. When purchasing or selling a home, anyone involved with the purchase, sale, or loan on the property should re-evaluate their life insurance needs. If you are purchasing a second home or a rental property, it is essential to be sure your life insurance needs are covered by your policies. While life insurance isn’t meant to pay off loans on properties, it can provide security for a surviving partner so that they don’t have to worry about foreclosure during an already stressful time that accompanies a death of a partner.
Children going to college
As children grow and leave the family home, life insurance needs will change. Many people would think that they need less insurance when the kids leave for college, but that is generally not the case.
Parents need to be sure that they have enough insurance that, should something happen to one of them, the children would be able to continue with their education uninterrupted. Though college-age children are legally considered adults, generally they are still dependent upon their parents for most of their support.
Should something happen to one of their parents, many students are forced to leave school due to financial hardships. Research has proven that if a young adult leaves college for financial reasons, they are unlikely to return to college once they have entered the workforce.
Therefore, as children reach college age and begin pursuing higher education, parents should re-evaluate their life insurance coverage in order to secure your children’s ability to stay in school even if there is a death in the family.
Once again, retirement brings changes in finances, responsibilities, and needs. As a part of your retirement planning, a re-evaluation of life insurance policies should be on your task list.
Even if one partner never worked outside the home, they still should participate in a re-evaluation of their policy at the time of their partner’s retirement.
Now is not the time to find out that you don’t have enough coverage to take care of funeral expenses and your family after your death. In order to have worry-free retirement so many people want, they must be willing to plan ahead.
While re-evaluation doesn’t necessarily mean that a policy change is needed, it is a good idea to revisit your life insurance policies during a major life change.
Even if a change isn’t needed, it is better to get that information from an insurance professional instead of finding out too late that you didn’t have enough coverage.
Life insurance generally isn’t for the insured; it is for the family who is left behind in order to secure their way of life and ability to be financially solvent in a very stressful time of life. By doing an insurance “check-up” when you encounter a big change in your life, you will ensure that your family is taken care of no matter what may happen to you.
Useful Tips on Finding Life Insurance Quotes
A person often finds it difficult to get a life insurance quote which is the most suitable one for him or her. But if one follows the five steps that have been mentioned below, then the whole process is bound to get a lot simpler.
Steps to Follow while Availing Life Insurance Quotes
- You must have a clear idea of exactly which insurance you need. You should be able to realize which insurance quote will meet your requirements exactly. You can verify different quotes and see which one ends a bit earlier, or on which one you can acquire premiums which are less expensive. Once you have decided on which insurance quote will suit you the best then it will be just a matter of a few minutes.
- There are a few questions which you should stay answer before you avail a life insurance quote. The questions will appear on a single page and you need to apply them in accordance with your needs. The better your responses are the more relevant will be the insurance quotes. If you respond to the questions the first time then you can get a wide range of insurance quotes from various life insurance companies. Truly, there is no need for you to visit each of the life insurance companies or answer the same questions again and again. You should always be looking to save as much effort and time as you can.
- You need to check the different rates offered by all the life insurance companies. Therefore, after proper analysis, you will be able to realize which insurance company offers the most reasonable rate. You can locate that company who are providing the most suitable insurance quote for you within your budget. This step of evaluation is highly important for getting the perfect quote of life insurance.
- Before purchasing any insurance coverage you must always determine whether you have the eligibility to claim any additional discounts or not. All life insurance companies offer different rates of discounts, so you must make the inquiry before purchasing. Obtaining reductions will decrease your current charge to a great extent.
- For any doubt you have in mind, you must feel comfortable to ask a broker you know and get clarified. You can ask the local advisor to make those areas clear to you whom you have doubts about. The policy rates, the expiry period and such other parts of the policy are often quite complicated and it is always good to seek advice from experienced people. They can also help you in the searching process and find out the most suitable life insurance policy for you. Their help will give you a clear idea about every single detail before you go to have a talk with the insurance providers.
If all the above-mentioned guidelines are followed then you will be easily recognized that particular policy of life insurance which has the features required to meet all your needs. If the steps are followed thoroughly then an appropriate insurance quote can be found out in just a few minutes.
Is Life Insurance Worth the Investment?
If you’re under the age of 50, you may not have the slightest thought of life insurance in your head at the moment. This is something that most people only think about after they start approaching their retirement years. Life insurance is designed to provide your family with a way to pay for your final expenses when you pass on.
The coverage is not required by law, but it is something you may want to consider for your future. You might be surprised by what you could get out of the investment. In this post, I will provide an analysis of life insurance to help you see if it is worth the money.
The Purpose of Life Insurance
To determine if life insurance is worthy of your money, you need to understand what it is used for. Funeral costs are incredibly high nowadays, and life insurance is designed to help your family pay for your final costs whenever the time comes.
Rather than slapping them with a $10,000 burial bill, you can pay for life insurance to cover your costs instead. This will give them peace of mind after your passing so they can mourn and regroup. The stress you will save your family is well worth the money you may pay for a policy.
The Added Benefits of Life Insurance
Life insurance doesn’t have to be strictly used for your final expenses. It can also be used as a way to invest money for the future. My life insurance rates are kind of high because I decided to invest in a high-interest plan. Because of that though, my money grows in value every time I pay a premium.
You can choose from a vast assortment of investment options when you get life insurance, including indexed policies that allow you to select a market to invest in. You just have to figure out what you want to do.
If you get a universal life insurance policy, you can actually take out the money you put in while you are still living. That could help you get out of a bind later on, or it could provide you with money for retirement.
Some insurance policies have no withdrawal fees, so you can literally access your money at any time. If you ever get stuck in a hole that you cannot get out of, this type of policy can bail you out. Having life insurance may also be a stress relief for you because you know your family will be okay if you pass on unexpectedly.
Whether you’re 18 or 81, the fear of leaving your money with a financial burden is eventually going to catch up with you. You might as well get a policy now so you won’t have to worry about all of this in the future.
How to Get Life Insurance
If my little analysis has convinced you to get life insurance, you first need to explore the different policy options available to you. You could get guaranteed life insurance, indexed universal life insurance, term life insurance, and much more. It just depends on where you want your money to go and how much of it you want to spend each month.
Check out some of the coverage options available for you, and then you can start investing in a policy. Once you know what you want, you need to compare rates from multiple insurance companies to get the best deal possible.
Life insurance premiums range just as much as car insurance premiums, so you have to make sure you find the right company and policy for your budget. Changes in your coverage options will impact your premiums, so play around with the numbers until you like what you see.
Then you can sign up for a policy. You may have to go through a medical exam after registering for your policy, depending on which one you choose. If you get guaranteed life insurance, you won’t have to worry about. Do whatever it takes to secure a policy, and then you can start living stress-free. It only takes a little investment to make a big difference for your future.
Is Life Insurance Necessary After Retirement?
Retiring is a right you earn after a lifetime of working and planning. To be able to sleep when you want, take trips as you please, and enjoy the remaining years of your life is a priceless luxury that you work towards while you are still young.
As your retirement approaches, you are left with more decisions than just where to retire. You should also consider whether or not you still need life insurance. If canceling your life insurance seems like a foreign concept, take these conditions into consideration.
Financial Security during Retirement:
As you are younger and working for everything you have, life insurance is a way to protect your loved ones from the financial burden if anything happened to you. These could include existing bills, loans, funeral arrangements, etc. At that time, life insurance is an investment for protection in case of tragedy.
As you reach your golden years, you have the option of retiring. This means you have a steady flow of income that surpasses current costs of living, or a hefty savings account balance that will outlast you. Either way, you have financial freedom that you worked towards. With this freedom comes the ability to weigh the need for life insurance.
If your income will continue after you have passed on and will not leave your loved ones struggling, you may very well be wasting your money on life insurance. If you own your home, your car, and have no debt, there is no need to continue paying for life insurance.
Another option is to set aside funds for proper funeral arrangements, or even pre-pay for your funeral yourself. In the event of your passing, the costs will already be paid for and your remaining assets will go to whomever you deem within your Will.
Conditions Where Life Insurance is needed:
Even after retirement and with financial security, there are conditions that will require life insurance. For instance, if your passing will eliminate a substantial portion of the family income, you will need life insurance to offset the loss.
Another condition would be if you own a thriving business with high net worth. Your business may be subject to estate taxes after your passing. Estate taxes will often create a financial hardship on the family if you have decided to cancel life insurance.
As health care has grown and allowed longer lives, many older couples are adopting children and becoming aging parents. If you have non-adult children, keeping your life insurance is needed to protect that child.
Determining whether or not you still need life insurance is a decision that takes a lot of planning and consideration. Though many decide to keep their policies in place during retirement, there are situations where you may no longer need your life insurance policy.
Take a look at your current financial situation, assets, taxable estates, and the possibility of future monetary risks your passing may cause to determine if you need life insurance.