Term Life vs. Whole Life Insurance: Which Is Best for You?

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Disclaimer

Taking out a life insurance policy is a great
way to protect your family’s financial future. A policy can also be a useful
financial planning tool. But life insurance is a notoriously tricky subject to
tackle.

One of the hardest challenges is deciding
whether term life or whole life insurance is a better fit for you.

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Not sure what separates term life from whole
life in the first place? You’re not alone. Insurance industry jargon can be
thick, but we’re here to clear up the picture and make sure you have all the
information you need to make the best decision for you and your family.

Life Insurance = Financial
Protection for Your Family

Families have all sorts of expenses: mortgage payments, utility bills, school tuition, credit card payments and car loan payments, to name a few. If something were to happen and your household unexpectedly lost your income or your spouse’s income, your surviving family might have a difficult time meeting those costs. Funeral expenses and other final arrangements could further stress your family’s financial stability.

That’s where life insurance comes in. Essentially, a policy acts as a financial safety net for your family by providing a death benefit. Most forms of natural death are covered by life insurance, but many exceptions exist, so be sure to do your research. Death attributable to suicide, motor accidents while intoxicated and high-risk activity are often explicitly not covered by term or whole life policies.

If you die while covered by your life
insurance policy, your family receives a payout, either a lump sum or in
installments. This is money that’s often tax-free and can be used to meet
things like funeral costs, financial obligations and other personal expenses.
You get coverage in exchange for paying a monthly premium, which is often
decided by your age, health status and the amount of coverage you purchase.

Don’t
know how much to buy? A good rule of thumb is to multiply your yearly income by
10-15, and that’s the number you should target. Companies may have different
minimum and maximum amounts of coverage, but you can generally find a
customized policy that meets your coverage needs.

In addition to the base death benefit, you can enhance your coverage through optional riders. These are additions or modifications that can be made to your policy—whether term or whole life—often for a fee. Riders can do things like:

  • Add coverage for disability or deaths not commonly
    covered in base policies, like those due to public transportation accidents.
  • Waive future premiums if you cannot earn an income.
  • Accelerate your death benefit to pay for medical bills
    your family incurs while you’re still alive.

Other
riders may offer access to membership perks. For a fee, you might be able to
get discounts on goods and services, such as financial planning or health and
wellness clubs.

One
final note before we get into the differences between term and life: We’re just
covering individual insurance here. Group insurance is another avenue for
getting life insurance, wherein one policy covers a group of people. But that’s
a complex story for a different day.

Term Life Policies Are Flexible

The “term” in “term life” refers to
the period of time during which your life insurance policy is active. Often,
term life policies are available for 10, 20, 25 or 30 years. If you die during
the term covered, your family will be paid a death benefit and not be charged any future
premiums, as your policy is no longer active. So, if you were to die in year 10
of a 30-year policy, your family would not be on the hook for paying for the
other 20 years.

Typically, your insurance cannot be canceled
as long as you pay your premium. Of course, if you don’t make payments, your coverage will lapse, which typically
will end your policy. If you want to exit a policy you can cancel during an
introductory period. Generally speaking, nonpayment of premiums will not affect your credit score, as
your insurance provider is not a creditor. Given that, making payments on your
life policy won’t raise your credit score either.

The major downside of term life is that your
coverage ceases once the term expires. Ultimately, once your term expires, you need to reassess
your options for renewing, buying new coverage or upgrading. If you were to die
a month after your term expires, and you haven’t taken out a new policy, your
family won’t be covered. That’s why some people opt for another term policy to
cover changing needs. Others may choose to convert their term life into a
permanent life policy or go without coverage because the same financial
obligations—e.g., mortgage payments and college costs—no longer exist. This
might be the case in your retirement.

The Pros and Cons of Term Life

Even though term life insurance lasts for a
predetermined length of time, there are still advantages to taking out such a
policy:

  • Comparably lower cost: Term life is usually the more affordable type of life insurance, making it the easiest way to get budget-friendly protection for your family. A woman who’s 34 years old can buy $1 million in coverage through a 10-year term life policy for less than $50 a month, according to U.S. News and World Report. A man who’s 42 can purchase $1 million in coverage through a 30-year term for just over $126 a month.
  • Good choice for mid-term financial planning: Lots of families take out a term life policy to coincide with major financial responsibilities or until their children are financially independent. For example, if you have 20 years left on your mortgage, a term policy of the same length could provide extra financial protection for your family.
  • Upgrade if you want to: If you take out a term life policy, you’ll likely also get the option to convert to a permanent form of life insurance once the term ends if your needs change. Just remember to weigh your options, as your rates will increase the older you get. Buying another term life policy at 50 years old may not represent the same value as a whole life policy at 30.

There are some drawbacks to term life:

  • Coverage is temporary: The biggest downside to
    term life insurance is that policies are active for only so long. That means
    your family won’t be covered if something unexpected happens after your insurance
    expires.
  • Rising premiums: Premiums for term life
    policies are often fixed, meaning they stay constant over the duration of the
    policy. However, some
    policies may be structured in a way that seems less costly upfront but feature
    steadily increasing premiums as your term progresses.

Young Families Often Opt for Term Life

The rate you pay for term life insurance is
largely determined by your age and health. Factors outside your control may influence the rates you
see, like demand for life insurance. During a pandemic, you might be paying
more if you take a policy out amid an outbreak.

Most consumers seeking term life fall into
younger and healthier demographics, making term life rates among the most
affordable. This is because
such populations present less risk than a 70-year-old with multiple chronic
conditions. In the end, your rate depends on individual factors. So if
you’re looking for affordable protection for your family, term life might be
the best choice for you.

Term life is also a great option if you want a
policy that:

  • Grants you some flexibility for
    future planning, as you’re
    not locked into a lifetime policy.
  • Can replace your or your spouse’s
    income on a temporary basis.
  • Will cover your children until
    they are financially stable on their own.
  • Is active for the same length as
    certain financial responsibilities—e.g., a car loan or remaining years on a
    mortgage.

Whole Life Insurance Offers
Lifetime Coverage

Like with term life policies, whole life
policies award a death benefit when you pass. This benefit is decided by the
amount of coverage you purchase, but you can also add riders that accelerate
your benefit or expand coverage for covered types of death.

The biggest difference between term life and
whole life insurance is that the latter is a type of permanent life insurance.
Your policy has no expiration date. That means you and your family benefit from
a lifetime of protection without having to worry about an unexpected event
occurring after your term has ended.

The Pros and Cons of Whole Life

As if a lifetime of coverage wasn’t enough of
advantage, whole life insurance can also be a highly useful financial planning
tool:

  • Cash value: When you make a premium payment on
    your whole life policy, a portion of that goes toward an account that builds
    cash up over time. Your
    family gets this amount in addition to the death benefit when their claim is
    approved, or you can access it while living. You pay taxes only when the money
    is withdrawn, allowing for tax-deferred growth of cash value. You can
    often access it at any time, invest it, or take a loan out against it. However, be aware that anything
    you take out and don’t repay will eventually be subtracted from what your
    family receives in the end.
  • Dividend payments: Many life insurance
    companies offer whole life policyholders the opportunity to accrue dividends
    through a whole life policy. This works much like how stocks make dividend
    payments to shareholders from corporate profits. The amount you see through a dividend payment is
    determined by company earnings and your provider’s target payout ratio—which is
    the percentage of earnings paid to policyholders. Some life insurance
    companies will make an annual dividend payment to whole life policyholders that
    adds to their cash value.

Some potential downsides to consider include:

  • Higher cost: Whole life is more expensive than
    term life, largely because of the lifetime of coverage. This means monthly
    premiums that might not fit every household budget.
  • Interest rates on cash value loans: If you need emergency extra
    money, a cash value loan may be more appealing than a standard bank loan, as
    you don’t have to go through the typical application process. You can also get
    lower interest rates on cash value loans than you would with private loans or
    credit cards. Plus, you don’t have to pay the balance back, as you’re basically
    borrowing from your own stash. But if you don’t pay the loan back, it will be
    money lost to your family.

Whole Life Is Great for Estate Planning

Who stands to benefit most from a whole life
policy?

  • Young adults and families who can
    net big savings by buying a whole life policy earlier.
  • Older families looking to lock in
    coverage for life.
  • Those who want to use their policy
    as a tool for savings or estate planning.

To that last point, whole life policies are particularly advantageous in overall financial and estate planning compared to term life. Cash value is the biggest and clearest benefit, as it can allow you to build savings to access at any time and with little red tape.

Also,
you can gift a whole life policy to a grandchild, niece or nephew to help
provide for them. This works by you opening the policy and paying premiums for
a set number of years—like until the child turns 18. Upon that time, ownership
of the policy is transferred to them and they can access the cash value that’s
been built up over time.

If you’re looking for another low-touch way to leave a legacy, consider opening a high-yield savings account that doesn’t come with monthly premium payments, or a normal investment account.

What to Do Before You Buy a
Policy

Make sure you take the right steps to finding
the best policy for you. That means:

  • Researching different life insurance companies and their policies, cost and riders. (You can start by reading our review of Bestow.)
  • Balancing your current and long-term needs to best protect your family.
  • Buying the right amount of coverage.

If you’re interested in taking next steps, talk to your financial advisor about your specific financial situation and personal needs.

Infographic explaining the difference between term and whole life insurance policies.


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Source: credit.com

Why More People May Buy Life Insurance in 2021

Family together around computer
Photo by Juergen Faelchle / Shutterstock.com

A federal law passed at the end of 2020 has made permanent life insurance more attractive to some people.

The law essentially tweaks the tax code to allow owners of permanent policies to put more money into the savings portion of their policy.

As we have explained previously, permanent policies, also known as whole life policies, are a combination insurance-and-savings vehicle. Part of your monthly premiums pay for a death benefit, and another part goes into an internal savings account.

The Wall Street Journal describes the key law change — which went into effect on Jan. 1 for new policy sales — as follows:

“The law lowers a minimum interest rate used to determine whether combination savings and death-benefit policies known as permanent life insurance are too much like investments to qualify for tax advantages granted to insurance. The interest-rate floor was put in place in 1984 to weed out policies that were mostly investment vehicles with a thin layer of insurance.”

The WSJ adds that the change will make it more attractive for insurers to sell permanent life policies. In recent years, interest rates have fallen so low that the old standard minimum interest rate — which was established in the 1980s — was actually higher than the yield on long-term government-bond yields.

That reality had forced many insurers to consider ending sales of permanent life insurance policies. Life insurance companies typically make profits by investing customers’ insurance premium money in bonds until a claim is made on the policy.

Permanent life insurance allows policyholders to defer paying taxes on any money they make on investment and savings income within the policy. In addition, upon the policyholder’s death, beneficiaries usually do not have to pay taxes on the death benefit they receive.

That combination of perks makes whole life insurance more attractive to some people than term life insurance.

Now, the WSJ notes, that the recent tax-code change may make permanent life policies especially appealing to the wealthy:

“This change applies to buyers of all income levels, though wealthier people would typically be better able to afford extra payments into a policy.”

Additionally, President-elect Joseph R. Biden Jr. has said he intends to raise taxes on the wealthiest Americans, so those in higher income tax brackets may look to life insurance as a way to reduce taxes.

Is permanent life insurance right for you? Before putting down money on a life insurance policy, read “Which Is Better: Term or Whole Life Insurance?“

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

How to Get Cheaper Life Insurance Policies

  • Life Insurance

Life insurance is essential if you have debts, a mortgage or lots of dependents. However, the older you are, the more expensive it becomes. If you add medical issues and other health concerns to the mix then you might be refused altogether or quoted astronomical premiums that make you question whether it’s worth the protection.

Find the Right Life Insurance for You!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

Fortunately, there are a few things you can do, ways you can improve your chances of securing favorable terms and getting cheap protection for your family.

Choose a Term Policy

Life insurance comes in many shapes and sizes, but all policies are variants of a whole life policy and a term life policy. The former lasts for the policyholder’s “whole life”, but can also be cashed out sooner; the latter is limited to a fixed term of between 10 and 30 years.

To the insurance company, it’s all about balancing expected profit and loss. With a whole life insurance policy, the risks are higher because they will pay out regardless of how long the policyholder lives and can only profit if the payments lapse or the policy is cashed. With a term life policy, the odds are always weighted in their favor because the policies are set to a fixed-term that the policyholder is likely to survive.

For instance, if you’re a healthy 20-year-old, you shouldn’t have an issue getting a full 30-year term because there’s a greater than 1 in 20 chance you will survive it. If you’re 60, your term may be limited to 10 or 20 years, because anything above that begins to tip the balance back the other way.

By opting for a term life insurance, you can place probability in the underwriter’s favor, thus ensuring you are offered the best rates. The shorter the term, the better those rates will be.

Lose Weight

Height and weight are two major factors in determining the likelihood of a policyholder making it to the end of their term. The simple calculations will tell them whether you fall into an “overweight” or “obese” category, in which case your risk increases significantly.

If you’re in these categories, try to lose weight before you apply. Life insurance companies consider obesity to be as much of a risk factor as smoking and every pound you lose will reduce that risk and thus decrease your premiums.

If you have a lot of muscle and an average amount of fat, you may also face some issues as your weight won’t tell the whole story. This is one of the few times when a medical exam is preferred, as that way you can prove you are not overweight and should be considered a low-risk as opposed to a high one.

Quit Tobacco

It’s a no-brainer—smoking massively increases your mortality risk and smokers live ten years less on average. The life expectancy in the United States is just under 80 years. To an insurance company, a smoker is uninsurable beyond that 70th year, making a thirty-year term highly unlikely for anyone aged 40 or more.

Smoking also increases your risk of heart disease, cancer, and a host of other conditions. It’s a huge red flag and one that will increase your life insurance premiums, decrease your payout, and reduce your chances of being accepted altogether.

Saying no to the cancer-sticks will save you a small fortune on your insurance premiums and will also reduce your monthly bills, with the average smoker spending just under $2,300 every month.

It’s not just smoking that life insurance companies focus on. They’ll also penalize you if you chew, sniff or vape tobacco.

Be Careful How You Select Your Hobbies

Underwriters pay very careful attention to what you do in your downtime. If you spend your days shopping, chatting with friends and playing basketball, they’re not going to bat an eyelid. But if your days are spent playing extreme sports, bungee jumping and skydiving, you will be considered high risk.

Some activities are riskier than others and, in some cases, they can make you as much of a liability as obesity and smoking. It’s worth reconsidering your more extreme hobbies if you’re struggling to find cheap life insurance. All the following will make life insurance companies think twice:

  • Boxing/Fighting (if you actually partake in combat and don’t simply train)
  • Skiing and Snowboarding
  • Rock Climbing
  • Deep Sea Diving
  • Base Jumping
  • Skydiving
  • Bungee Jumping
  • Surfing
  • Automobile Racing

Think Twice about Bankruptcy

Bankruptcy can increase your premiums because it is a known contributor to stress, which in turn can increase your risk of heart disease and many other chronic conditions. What’s more, someone who files for bankruptcy is also more likely to commit suicide.

Bankruptcy is never something you should rush into as it can leave a derogatory mark on your credit report that remains for up to 10 years. However, this aspect is rarely considered, even though it could seriously inflate your premiums.

Stay Honest

Honesty isn’t going to reduce your premiums, far from it, but it will make life much easier for your family if anything happens to you. If you lie on your insurance policy and you die during the contestability period, which begins as soon as the policy is active and ends after a year or two, the claim will be refused.

This can happen even if the contestability period is over, as long as the life insurance company can prove that you filed a fraudulent application. Life insurance is something you purchase to protect your family against the unexpected. It’s not something you can predict with any degree of certainty, so lying and hoping that you will swerve the contestability period and avoid any issues is reckless at best and criminal at worst.

Stay honest, keep it simple, and try the other tips in this article to reduce your premiums legitimately.

Summary: Quote and Compare

Some of the things that you might expect to have a big impact on your life insurance premiums actually count for very little. For instance, riding a motorbike will not impact your eligibility unless you ride professionally. By the same token, it doesn’t matter much if you spend a lot of time in the car, providing you’re not racing at high speeds every weekend.

The things you need to focus on the most to get a cheaper life insurance policy are your weight and smoking status. These are the things you can control, the things you can fix with time and perseverance. If you want to see just how much if a difference they can make, get a life insurance quote before you lose weight and/or quit smoking and then get a quote from the same company afterward.

You will be in a much more favorable position and should be offered lower premiums, even though you have aged an additional year or two since you last applied.

Source: pocketyourdollars.com

Joint and Survivorship Insurance: What You Need to Know

  • Life Insurance

A joint insurance policy is one taken by two people, offering benefits that aren’t provided by single policies and allow you to save a few bucks in monthly premiums. If you’re married and want your spouse to receive a benefit if you die and your children to receive one if you both die, it seems like the best choice.

Find the Right Life Insurance for You!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

But that isn’t necessarily the case. Joint life insurance policies certainly serve a purpose, but there are some major flaws to consider as well.

What is Joint and Survivorship Insurance?

There are two types of joint life insurance policies: First-to-die and Second-to-die. In both cases, these options are generally cheaper than a single life insurance policy that offers the same benefit. As a result, they’re often taken by married couples who only have each other and their children to consider.

For instance, if you’re married with two young children and all your death benefit will be paid to your spouse and then, if they die, to your children, it can seem like the best option. You’ll be offered cheaper premiums, you’ll get your wish, and at the same time, you’ll be covered if anything happens to your partner.

Perfect, right? Well, not quite, as there are some problems to consider.

First-to-Die

A first-to-die policy pays money to one policyholder when the other dies. If you have a $500,000 policy charging $100 a month, then you and your spouse are responsible for paying the $100 and if one of you dies, the obligations will end and the $500,000 will be released to the surviving spouse.

Pros and Cons of First-to-Die Insurance

This insurance policy seems like a win-win on the surface. Insurance companies can save money by acquiring two customers at once and reducing liabilities slightly, while the policyholders can get the benefits provided by two policyholders.

But what happens if you break up? These policies are often acquired by married couples in their 30s and can last for several decades. At that point, they may have spent anywhere from 5 to 15 years together and are assuming they will spend the next 30 or so years together as well. But the average marriage lasts for just 8 years and no matter how connected you feel today, there’s just no way of knowing that your relationship will last.

If anything does happen, all those premiums could be for nothing. The policy will still exist and if you keep making the payments, you’ll keep the death benefit alive. But if you remarry, you’ll likely want the money to go to your new partner and not your ex.

This is the biggest issue with these policies and it’s why many insurance experts don’t recommend them for young couples. If you had two policies, you could just as easily make your spouse the beneficiary and if the relationship ends, you could remove them from the contract and add the name of your new partner.

What’s more, there’s no guarantee that this policy will be cheaper than two separate policies. First-to-die policies are actually quite rare, which means the market isn’t very strong. When competition is weak, prices are high, and in many cases, you may struggle to find a joint policy that is cheaper than separate ones.

Finally, let’s assume that the applicants are in their thirties and one of them dies when they reach 50. The surviving spouse then collects the money and can live comfortably thereafter. But what about their children? What about their new partner, assuming they find one? That policy will have finished, which means the surviving policyholder now needs to pay for additional insurance if they want to remain covered. That can be tricky for a 50-year-old widower, as premiums will have increased significantly.

Second-to-Die

A survivorship policy, also known as a “second-to-die” policy, is more common than the option outlined above. It is frequently acquired by married couples who want to provide cover for their children, and it pays out only when both of them die.

Pros and Cons of Need Second-to-Die Insurance

A second-to-die life insurance policy has its uses. It’s often recommended to individuals with large and valuable estates, as it can give heirs money to cover inheritance taxes and other costs and allow them to better prepare for the transition. 

However, if you’re an average married couple without sizeable assets, it likely won’t provide the benefits you need. Firstly, the surviving spouse won’t be provided with a death benefit and will be tasked with continuing to pay insurance premiums every month. If they have any financial issues, not only will they struggle to stay in the black, but they may be forced to stop making those monthly payments, thus rendering all previous payments redundant.

On the plus side, second-to-die life insurance is often cheaper than purchasing separate life insurance policies. It’s also much easier to acquire, as the insurance company is insuring two people and not one, which greatly reduces their risk and means they are less concerned about health questions and medical exams.

It can also improve the value of your estate, which is important if you’re giving this away to one or more heirs. Again, though, we have to stress that the benefits may not be enough for the average married couple and they should instead look into separate life insurance policies.

Which Policy is Right for You?

With all things considered, how do you know which policy is right for you?

Multiple options and several factors to consider, but it’s actually quite simple. Unless you have a large estate, you should look into getting separate life insurance policies for both you and your spouse. You can make each other the main beneficiaries and then add the names of your children just in case you both die at the same time.

If you have a large estate and your spouse will not be left financially destitute in the event of your demise, second-to-die life insurance should be considered. 

With all options, however, you can get quotes, compare the premiums, payouts, and benefits, and then see which one stands out the most. 

Look into term-life insurance, whole-life insurance, and accidental death insurance when considering an individual policy, as they all provide something a little different and both the costs and cover varies greatly.

Source: pocketyourdollars.com

3 Tips for Finding an Affordable Life Insurance Policy

September 12, 2019 &• 5 min read by Alice Stevens Comments 0 Comments

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Life insurance offers protection for your family’s financial security. Many people buy themselves a life insurance policy that will protect their family. It’s also possible for people to purchase life insurance policies for someone else. For example, children can purchase policies for their parents and vice versa.

Life insurance coverage offers valuable financial protection. You need to find a policy that meets your coverage needs and fits your budget. Here are three tips that will help you find the right fit:

Understand Policy Options

Premium rates vary based on the kind of policy you choose. There are two broad categories of life insurance—temporary and permanent.

Temporary life insurance, or term life insurance, offers a death benefit payout if the insured passes away during the timeframe the policy covers.

Policyholders can choose the length of the term and the death benefit amount. Some companies offer additional coverage options, called rides, that can be attached. These range from accelerated death benefit riders to return of premium riders. These additional riders add more value to the policy, which also affects the rates.

Permanent life insurance has its own two categories—whole life and universal life. Both kinds of permanent life insurance accrue cash value over time. The cash value can be used to purchase paid-up additions, pay premiums or be borrowed against.

Like term life insurance policies, policyholders can choose to add additional coverage with riders. Riders vary by company and affect the monthly premium.

Whole life policies typically have the highest premiums because the coverage is permanent, and there’s generally a guaranteed cash value growth rate. Most whole life policies come with high death benefit amounts. Policyholders can choose the amount when they sign up for the policy.

However, for those who need less coverage or only enough to cover funeral expenses, final expense insurance policies are a great option. Final expense insurance is designed for seniors. It’s a type of whole life insurance, but the death benefit amounts are much lower. Because the death benefit is only enough to cover funeral expenses, premiums tend to be lower.

There are a few kinds of universal life insurance policies. The biggest difference with these policies is how the funds are invested. The cash value of variable universal policies is invested in multiple accounts, including stocks and bonds. The cash value of indexed universal policies is invested in indexes, which are diversified investments.

Because there is no guarantee of how the cash value will grow in the investments, universal life insurance premium rates tend to be lower than whole life insurance premium rates.

Work with an independent agent

While the various types of life insurance are common among life insurance companies, not all companies carry every kind. It’s a good idea to know what kind of life insurance policy you want before starting to work with companies.

If you’re not sure what kind of life policy you want, work with a life insurance agentto ensure that you find an affordable policy that meets your coverage needs. A licensed agent can help you through the entire process of selecting and applying for a policy.

Working with a licensed independent agent also has other advantages. The specific terms, riders and premium rates can vary by company. Independent agents sell policies from multiple companies, so they can help you compare similar policies across companies.

An independent agent can help you understand the underwriting process and find a policy that is a good fit for your situation. In addition to comparing coverage and terms across companies, an independent agent can help you compare premium rates.

Working with an independent agent makes the research process easier for you because you don’t have to reach out directly to companies. Instead, you can work with one person to find the best company and rate for you.

Use quote websites wisely

While some people like working with an agent, others may prefer to do independent research. Quote websites come in handy because they make it easy to quickly view your options.

There are many life insurance quote websites to choose from. So, how do you know if you’re working with a good company?

First, it’s important to understand what kind of quote website you’re using. Some websites, like Geico and Progressive, show quotes from multiple life insurance companies. These quotes allow visitors to compare their policy options across companies. However, these companies just show quotes and connect their visitors to companies.

Others, like Bestow, Haven Life and Ladder, only show quotes for the policies they offer. These companies help their clients through the application process, which is another benefit of working with them.

Others, like Quotacy, show quotes from multiple life insurers and help their clients through the application and underwriting process. Quotacy agents even assist their clients in making updates to their policy after they purchase a policy.

Second, it’s important to know what kinds of policies the website shows. Many online tools focus solely on term life insurance. While this is a shared characteristic across many quote websites, each one has its unique features.

For example, Ladder stands out because its policies allow policyholders to adjust coverage during the term as their needs change.

In contrast, other quote websites show quotes for different kinds of permanent life insurance. This is true of many sites that only offer quotes, like Geico and Progressive. Websites that offer more comprehensive services, like Quotacy and Policygenius, also offer quotes for permanent life insurance policies.

Finding affordable life insurance

Life insurance offers valuable financial protection for your family. It can pay off remaining debt, cover funeral expenses and even replace income.

While the protection offered is highly valuable, it’s important to find a plan that fits into your monthly budget. The first step is determining what your needs are and which kind of life policy best meets those needs. From there you can work with an independent life insurance agent and do your research into policies and premium rates offered by different life insurance companies.


Alice Stevens loves learning languages and traveling. She currently manages debt and tax relief, life and health insurance, and car warranty content for BestCompany.com.

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What is Accidental Death Insurance, and do you Need it?

  • Life Insurance

Accidental death insurance, also known as accidental death and dismemberment insurance, is a type of limited life insurance often acquired for a nominal fee or added to an existing policy. As the name suggests, it releases a benefit if the policyholder dies from an accident or suffers a dismemberment. 

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Accidents kill an estimated 160,000 Americans a year and are far more common amongst men aged between 18 and 44. Many of these deaths occur as a result of falls and motor traffic accidents, both of which are covered by most accidental death insurance policies.

When You Don’t Need Accidental Death Insurance

If you already have life insurance, you can probably overlook accidental death insurance. In such cases, it will simply increase the value of the payout when you die, known as “double indemnity” coverage.

Unlike whole-life insurance policies, it does not provide policyholders with a separate investment vehicle that they can cash out at a later date. Generally, accidental death insurance doesn’t offer anything that a traditional life insurance policy can’t provide, and it may therefore be deemed an unnecessary expense.

However, there are exceptions.

When You Need Accidental Death Insurance

An accidental death benefit can’t provide you with anything that you won’t get from a traditional life insurance policy. However, it’s a different story with dismemberment insurance. This will cover you in the event that you lose a finger, toe or arm, which means you’ll have the money you need for medical costs and may be compensated for lost work.

Accidental death insurance can also help to cover any additional medical fees that result from necessary treatment taken after an accident and before death. Your family may be forced to cover these bills, and an additional death benefit can help them with that. 

Accidental death and dismemberment insurance is not something we would recommend in lieu of traditional life insurance, but if you have the option to add it to an existing policy for a few bucks a month, it’s well worth considering.

How Much Does Accidental Death Insurance Cost?

The price of your accidental death insurance premiums will depend on your payout as well as your risk factor. The average person can expect a charge of roughly $5 per month for every $50,000 of coverage, which means a benefit of $100,000 could cost as little as $10 a month.

But, as we have discussed many times before, underwriters focus on probabilities. The more likely you are to die from an accident, the higher those premiums will cost. For instance, if you’re an 18-year-old who has just started driving and enjoys a few high-risk hobbies, you may see those premiums climb.

How Long Does Accidental Death Insurance Last?

Accidental death insurance policies typically run for up to 40 years. You choose the desired term at the start and this is used to calculate your premiums, with longer terms leading to higher prices on account of the increased risk.

What is Not Covered by Accidental Death Insurance?

Accidental death insurance generally doesn’t cover all accidents and all dismemberments. The exact coverage will depend on the policy, and it’s possible to tailor your policy to include some of the things not traditionally included, but this may increase the premiums.

Suicide

Suicide is a tricky one. Many life insurance policies will payout if the policyholder commits suicide, but only if it occurs after the first two years and it is proved that they committed suicide so their loved ones would benefit (although this is not easy to prove).

However, accidental death insurance policies tend to rule suicide out altogether. Many deaths caused by misadventure may be queried as suicide, such as falls and drownings, but unless there is actual proof that they intended to take their life, the death will often be ruled as misadventure, in which case an accidental death insurance policy may payout.

War Injuries

Accidental death insurance rarely pays out for deaths resulting from war injuries. This is true whether the policyholder is shot or dies from an explosion or fall. That death was certainly not intentional, so you could argue that the policy should pay, but most insurers will refuse.

Illness and Disease

An accidental death insurance policy is not designed to payout in the event that you die from an illness or disease. Your beneficiaries may also face some resistance if you had a serious illness or disease at the time of your death but an accident was ultimately the thing that killed you.

For instance, if you have a serious mobility problem and this causes you to fall, hit your head, and die, then technically an accident killed you, but that accident wouldn’t have happened if not for the illness, creating some technicalities that will no doubt lead to problems when filing a claim.

Drugs or Alcohol

An accidental overdose is rarely covered by accidental death insurance. There will be no benefit for your loved ones if it leads to your demise, and no benefit for you if it leads to long-term health complications.

This is not true for all policies, however, and there may be exceptions for drugs that were prescribed.

How Can the Cause of Death be Proved?

As alluded to already, the cause of death isn’t straightforward. With a traditional life insurance policy, if the policyholder dies outside of the contestability period, the insurers will rarely get involved. That changes if they have suspicions about the death and believe that a crime was committed (fraud, murder) but it’s rare.

With accidental death insurance, however, there are many more nuances. As a result, an official investigation may be ordered, and this can include an autopsy.

How Does the Dismemberment Payout Work?

If the policyholder losses an appendage as a result of an accident, they may receive a partial benefit paid direct to them. The policy will dictate how much is paid and why, but generally the payout will be made following a non-excluded accident that results in the loss of:

  • An arm
  • A leg
  • A finger
  • A toe
  • Sight

Higher payouts may also be provided if the policyholder suffers complete paralysis.

Source: pocketyourdollars.com

Life Insurance Myths Debunked

  • Life Insurance

Misconceptions and misunderstandings have perpetuated a number of life insurance myths over the years and prevented consumers from getting the cover they need. They see life insurance as something that it’s not, believing it to be out of their reach because of their lifestyle and their budget, or believing that it’s something it’s not.

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If you have dependents, want them to live comfortably, and don’t have assets or funds to give them, you need life insurance coverage. And if you have been avoiding life insurance because of something you’ve been told or something you believe, it’s time to dispel those beliefs and get to the truth of the matter.

Myth 1: Life Insurance Premiums are Expensive

One of the most common myths concerning life insurance products is that they are too expensive. It only makes sense, to the uninitiated at least. After all, if they’re promising a death benefit of $200,000 over a twenty-year period, it stands to reason that they would seek to claim at least 25% of that balance to guarantee a profit.

In fact, a recent study found that consumers who had never purchased life insurance overestimated the premium costs by between 400% and 500%. That’s a massive difference.

If you’re in your 20s or 30s and are relatively healthy, you can get 20-year term insurance for less than $20 a month, and if anything happens during that term your beneficiaries will get $200,000. Life insurance companies can afford to offer such huge payouts and low premiums because the chances of a young person dying during that term are very slim.

Assuming you’re paying $20 a month for a 20-year term life insurance policy, this means you’re paying $4,800 over the term, or 2.4% of the total payout. However, the odds of a 20-year-old woman dying during this time are 1.42%, and these odds drop significantly if you remove smoking, drinking, risk-taking, and pre-existing conditions from the equation.

In other words, while it seems like a huge sum and a huge discrepancy, it still falls in favor of the life insurance company.

It’s a similar story for a 30-year-old. The odds of dying during the term are higher, but only just, as they are still less than 3%, leading to higher premiums but a great rate overall.

The older you get, the greater your risks become, but insurance companies want your money. They need you to sign on the dotted line, so they will continue to offer competitive prices. 

Keep this in mind the next time you purchase life insurance and are suspicious of the significant amount of coverage provided in relation to the cost.

Myth 2: It’s All About Money

Financial protection is important. You need a coverage amount that will cover the needs of your loved ones while also securing low premiums to make life easier for you. However, the generosity and cost of life insurance are the only factors to consider.

It’s important to consider the financial rating of the insurance company, which is acquired using a system such as A.M. Best and Moody’s. These ratings are used to determine the financial strength of a company, which is key, because you’re relying on them being around for many years to come and being rich enough to pay your death benefit when you die.

Myth 3: It’s All About the Death Benefit

While term life insurance policies are solely about the death benefit, which is paid upon the policyholder’s death, there are other options available. Whole life or permanent life insurance policies work like savings accounts as well as life insurance policies. They accumulate a cash value over the duration of the policy and the policyholder can cash this sum at any point.

If they do so, they will lose the potential death benefit and the policy will cease to exist, but it’s a good option to have if you ever find yourself in dire need of funds.

Myth 4: Insurers Find an Excuse Not to Pay

There was a time when pretty much all life insurance policies were reviewed upon the policyholder’s death. Thankfully, this changed with the introduction of a contestability period, which begins at the start of the policy and typically runs for up to 2 years.

If anything happens during this time, the policy can and will be reviewed and if any suspicions are raised, it will be contested. However, if this period passes, there is little the insurer can do. More importantly, if the policyholder was honest during the application process and the type of death is covered, the payout will be made.

The truth is that the vast majority of policies do not payout, but this is because the policies expire, the cash value is accepted, or the policyholder outlives the term. For policies that actually result in a death, the majority do payout. 

And why wouldn’t they? A life insurance company can expect to turn a profit via the underwriting process. It doesn’t need to use underhanded tactics or rob your loved ones of a payout to stay in the black.

Myth 5: My Dependents Will Survive Without Me

According to LIMRA, a research organization devoted to the insurance and financial sector, most Americans either have no coverage or not enough coverage. In both cases, they may assume their families will survive without a payout or that a small payout will be enough. There is some logic to this belief as it often comes after they perform a quick calculation, but that calculation is flawed.

Let’s imagine, for instance, that you’re a 35-year man with two children aged 5 and 7 and a 35-year-old wife. You earn $40,000 a year and your wife earns the same. You have a $150,000 house and a $100,000 mortgage.

After doing some quick calculations, you may assume that your wife’s salary will be enough to keep her going and ensure your children are looked after until they are old enough to care for themselves. You don’t have any debt to worry about and the only issue is the house, so you settle on a relatively small death benefit of $100,000.

But you’re making a lot of potentially dangerous assumptions here. Firstly, anything could happen between now and your death. On the one hand, you could comfortably pay off the mortgage, but on the other hand, inflation could rise to a point where $100,000 is a fraction of what it once was, and debts could accumulate. 

Your wife could also lose her job, and if that doesn’t happen when you’re alive and can get more cover, it might happen when you die, and she’s so overcome by grief and the stress of raising two children that she’s forced to give it up.

And then you have to think about your children. What if they want a college education? Can your wife afford that on her own? And what about your funeral or your children’s weddings? What happens if one of them falls ill and incurs huge medical expenses? 

$100,000 is a lot of money to receive as a lump sum, and if you only think in terms of lump sums you may never escape that mindset. But it’s not a single sum designed to be spent freely and enjoyed. It’s a sum designed to last your loved ones for many years and to ensure they are covered for most worst-case scenarios.

By the same token, you shouldn’t assume that your loved ones will survive without you just because you’re not the breadwinner or you have paid off your mortgage. Things can turn ugly very quickly. It only takes a few unexpected bills for things to go south, at which point that house could fall victim to an equity loan, a second mortgage, and eventually be owned by the bank when your loved ones fall behind.

Myth 6: Premiums are Tax Deductible

The premiums of an individual policy are not tax-deductible. However, there are exceptions if the individual is self-employed and using the coverage for asset protection. It’s also worth noting that the death benefit is completely tax free.

Myth 7: You Can’t Get Insurance Above a Certain Age

The older you are, the harder it is to get the financial protection that life insurance can provide. But it’s not impossible, just a little bit more expensive. Your insurance needs increase as you get older and life insurance companies have recognized this. They provide short-term policies specifically tailored to seniors. 

Known as Seniors Life Insurance or Final Expense Insurance, these policies provide a low lump sum payout, often less than $50,000, that can be used to pay for a funeral or to clear debts. You can even pay it directly to the funeral home and arrange your own funeral. 

You may also still qualify for a term life insurance policy. Of course, traditional whole life insurance policies are out of the question, and if you have a health condition you may be refused even a short term policy, but don’t give up before you do your research and check your options. 

This is something that most insurance agents will be happy to help you with.

Myth 8: Young People Don’t Need Life Insurance

Life insurance provides you with peace of mind. It aims to provide cover during a difficult time and ensures that your loved ones have financial support when dealing with your death. If you have dependents, then it doesn’t really matter how old you are. It’s true that you will probably outlive the term if you are young and healthy, but no one knows what’s around the corner.

Death is a certainty; the only question is when, not if. By not purchasing life insurance when you have dependents, you’re rolling the dice and placing their future at risk.

The younger you are, the cheaper the premiums will be and the less of an impact they will have on your finances. What’s more, you can also opt for whole life insurance, locking a rate in early and avoiding the inevitable regrets when you’re 60, don’t have any cover and are being quoted astronomical premiums.

Myth 9: You Won’t Qualify if you are in Bad Health

If you have been diagnosed with a terminal disease, it’s unlikely that any insurer would cover you. However, if you have survived a serious disease or have a pre-existing medical condition, you may still qualify.

It’s all about risk, and if the insurer determines you’re more likely to survive the term than not, they will offer you a policy based on those probabilities. The less healthy they consider you to be, the more premiums you will pay and the lower your death benefit will be. But you can still get a worthwhile policy and it might be a lot cheaper than you think.

Myth 10: If You Have Money, You Don’t Need Insurance

If you have assets to leave your heirs, a life insurance policy is not as important as it might be for a stay at home parent or a low-income couple. However, it still has its uses. 

For instance, many high-income households have a lot of debt, and while the assets can typically cover this debt, it will eat into the estate. There are also estate taxes and legal fees to consider, all of which can significantly reduce the value of the estate.

In this case, a short term policy can provide some additional coverage and ensure that those extra costs are covered.

Myth 11: The Money is Lost if there are no Beneficiaries

If you die with no beneficiaries, the money will likely go to your estate, at which point the probate process will begin. If you have a will, this process will be relatively quick and painless, and your designated heirs will get what they are owed. 

If not, things could get messy and the process will be slow. What’s more, if you have any debts, your creditors will take what they are owed from your estate, including your death benefit.

Adding a beneficiary will prevent all of this, but don’t expect the insurer to contact your beneficiary and let them know. They expect the beneficiary to come to them. It’s important, therefore, to assign at least one (and preferably more) beneficiary and to make sure they know of the existence of the policy.

Summary: Life Insurance Myths Debunked

Now that we’ve debunked the myths concerning life insurance, it’s time for you to get out there and get the cover you need. The type of life insurance you need, and the amount of death benefit you will receive, all depends on your personal circumstances and health. 

This is a subject we have discussed at length here at PocketYourDollars.com, so check out our other guides on the subject.

Source: pocketyourdollars.com

Final Expense Life Insurance: What You Need to Know

  • Life Insurance

Also known as burial or funeral insurance, final expense life insurance is a variant of whole life insurance designed to cover a single expense after the policyholder passes away. Often aimed at seniors, these insurance policies have reasonable monthly premiums but generally pay much smaller death benefits than term life insurance policies.

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What is Final Expense Life Insurance?

Final expense life insurance is a whole life insurance policy that releases a lump sum when the policyholder dies. It charges a fixed monthly premium and generally offers a simplified sign up process, with few complications, fast decisions, and no medical exams.

Policyholders use final expense life insurance to protect their loved ones after their death. It’s often taken in lieu of a traditional whole life policy or term like policy, with the former not available to seniors and the latter proving very costly and limited. 

Policyholders can add a beneficiary to their final expense life insurance policy to ensure that the money goes to this individual when they die. They can also arrange for the money to be paid in monthly or yearly installments, although considering the purpose of this policy is to cover “final” expenses that may arise or remain after death, it’s often best to release it as a lump sum.

Who Can Benefit from Final Expense Life Insurance?

You can benefit from a final expense life insurance if you:

  • Have dependents
  • Don’t have a whole life or term-life policy
  • Have sizeable debts
  • Are worried about funeral costs

Think about what will happen when you die. It’s a morbid thought to have, but it’s important to see things from your family’s perspective.

Can they afford to provide you with an honorable send-off; can they afford to clear your debts? Will your death impact them financially or will you leave them with enough cash and assets to cover necessary expenses?

Your loved ones need time to grieve, to mourn your loss. They shouldn’t have to worry about financial issues, as that will just make a bad situation worse.

What is Final Expense Life Insurance Used For?

You can use final expense life insurance to cover any costs that your loved ones would otherwise be required to pay. The most common uses for this type of life insurance include:

Funerals

The average funeral costs close to $10,000, and those costs are rising. It’s one of the five biggest expenses that the average American will incur during their lifetime, and unlike a wedding, car or home, it’s not something you can simply avoid by going without, nor is it something you can delay until you have more money.

If you die, your loved ones will need to cover these costs quickly and completely, and while you might want them to cut costs and avoid spending too much, they will want to ensure that you have the best possible send-off. 

The only way to guarantee that you have a good funeral and they don’t bankrupt themselves is to cover the costs before you die.

Final expense life insurance can be paid directly to your loved ones or to the funeral home. In the case of the latter, you can plan your funeral yourself, choosing products and services based on the value of the death benefit that will eventually be paid to the home.

Of course, you can’t be sure that the funeral home will honor all of your requests or even still be operating by the time you pass, so unless you don’t have anyone who can arrange your funeral, we recommend paying the death benefit directly to your beneficiaries.

Medical Bills 

You are predicted to spend over a quarter of a million dollars on healthcare during your lifetime, most of which will occur in the final decade of your life. That’s a huge sum of money to spend on anything, and it’s a terrifying prospect to think that this money could be passed onto your loved ones.

In most instances, your loved ones won’t be responsible for your debt, but there are exceptions. What’s more, all medical debt charged during the final months of your life will be at the head of the queue to take money from your estate when you die. If that debt strips your assets bare, it means your loved ones won’t get anything and may struggle to cover their own debts and expenses.

With final expense life insurance, you can use a death benefit to repay those medical bills and remove the burden of responsibility from your loved ones.

Debt

Unsecured debt is often at the back of the queue when it comes to taking money from your estate. However, if you live in a community property state or your partner cosigned on the debt, they will be responsible for it.

You also have to think about mortgage and auto debt. These loans can pass onto your heirs, who will then be tasked with continuing the repayments if they want to keep the assets. If they don’t have the money, they could lose those assets, and this is where a final expense life insurance benefit can help. 

Frequently Asked Questions about Final Expense Life Insurance

Still got a few questions about final expense life insurance and its many nuances? We have answered some of the most frequently asked questions below to lend a helping hand.

How Much Does It Cost?

Final expense life insurance varies depending on your age, sex, weight, smoking status, and whether or not you have any preexisting medical conditions. Generally speaking, a woman between the age of 50 and 55 can expect to pay between $30 and $40, while a man of the same age will be charged between $40 and $50.

This cost increases as you age and while you can still apply when you hit 80, you can expect premiums as high as $200 a month, or $2,400 a year. 

Why Does it Cost So Much?

The costs are higher than term-life insurance because the risks are greater. Unlike term-life insurance, the term will not expire, which means the odds of the recipient receiving the death benefit are higher. 

Of course, there is still a chance that they will fail to meet their payment obligations, at which point the policy will void, but such instances are rare for this particular type of insurance.

Does it Expire?

Your final expense life insurance policy will remain active for as long as you make your insurance premiums. It will not expire like a term-life insurance policy, but you will lose it if you stop making payments while you are still alive.

Does the Money Have to be Used for Funeral Costs?

Not at all. The insurance company doesn’t care what the money is used for as it doesn’t impact their bottom line. There is also nothing preventing your loved ones from pocketing the cash and burning your body in the garden, if that’s what they choose to do.

We don’t mean to sound bleak, but the point is, there are no restrictions or limits and your loved ones are only bound by your word and their promise, so if you want the money to be used for a specific purpose, make sure you get everything in writing lest they forget.

How Much is the Death Benefit?

Final expense life insurance typically pays around $20,000 and is always less than $50,000. It’s a small sum when compared to many term-life insurance policies, but that’s because it serves a specific purpose and is not designed to clear mortgages or cover one or more family members for the rest of their life.

Is There a Medical Exam?

Because the payout is less than $50,000, a medical exam is rarely required. You will be asked some basic health questions and you need to be honest during this process, but in most cases, you will not be required to undergo a medical exam.

Source: pocketyourdollars.com

How to Find Affordable Life Insurance

  • Life Insurance

Life insurance can be expensive and if it’s essential those high costs can leave a nasty taste in your mouth. You may wonder if it’s worth purchasing a policy at all, which could place your family in jeopardy as they won’t have the cover they need when you pass. 

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However, there are a few ways you can bring those costs down and get affordable life insurance. So, don’t despair, and take a look at these top tips for cheap life insurance.

How are Life Insurance Payouts and Premiums Judged?

Insurance underwriters set your premiums and your payout based on the likelihood that you will die during the term. It sounds pretty morbid, but these are for-profit companies we’re talking about and when death is your only liability, there’s no time for gentility. 

It’s something that frustrates everyone who has ever been quoted high premiums, but it’s important to see things from the perspective of the underwriter. If you’re 100 pounds over your ideal weight, your risk of heart disease, cancer, and countless other diseases increases, and you become more of a liability. 

It doesn’t matter how much you convince them that you’re on a diet and will lose all of that weight eventually—as things stand right now, you’re more of a liability than someone who weighs 100 pounds less.

Of course, it’s possible to be 140 pounds and unhealthy, just as it’s possible to be 240 pounds and healthy, and this is an argument that many applicants make. But those are the exceptions. The oldest woman ever smoked until the day she died and made it halfway through her 122nd year, and everyone knows of at least one smoker that continued the habit well into their 70th and 80th year, seemingly unaffected. 

However, the average smoker will die 10 years before their non-smoking counterpart and their risk of contracting a host of diseases increases exponentially for every decade that they stick with the habit. Should a life insurance company dismiss your habit just because of a 122-year-old French woman? Of course not. 

These are statistics and probabilities; they focus on the most likely and the most common. By their very nature, there will always be exceptions and outliers. A life insurance company doesn’t care about any of these because as long as they focus on the events that are most likely (obese policyholders and smokers will die young; preexisting medical conditions are more likely to reoccur than if they didn’t exist at all) the premiums will exceed the payouts and they will turn a profit. 

Start Early

The sooner you apply for life insurance, the better your chances of getting a high payout and a low premium. Age is one of the biggest factors in determining your mortality risk. A 20-year-old has a high chance of surviving a 30-year-term, but for every additional year, those odds decline and by the time they hit 55, the odds are no longer in their favor.

Starting early doesn’t just protect your loved ones if you die before your time, it also gives you more options. This is when whole life insurance policies are at their most beneficial. These will payout regardless, even if you live to be 100. The life insurance company will still benefit, however, because many of these policies either lapse because of non-payment (a lot can happen in those 80 years) or the policyholder takes the cash value.

They’re like a life insurance policy and saving account bundled into one, but they become less viable as you age.

Make Big Changes

You probably knew this tip was going to be here, but it’s worth mentioning: If you smoke, stop; if you’re obese, lose weight. We can’t stress enough how much of a difference these things will make to your life insurance application.

If you’re a smoker and you’re obese, you’re a massive liability. Statistically speaking, you’ll be beating the odds if you make it to your 60th year, which means a 30-year term stops being a viable option when you’re just 31! If that’s not enough to scare you, then there’s nothing we can say that will.

By quitting cigarettes and dropping a few dozen pounds, you improve your chances of living a long and full life, which, in turn, means you’ll get cheaper life insurance premiums.

And these are not the only changes you should consider making. Many applicants fail to calculate just how much of a liability they become when they partake in extreme sports and activities such as base jumping, parkour, sky diving, and rock climbing. Some of these are riskier than others, but in all cases, the underwriter will compare them to the averages to determine your likelihood of dying young.

Roughly 10 skydivers will die for every 1 million that jump on a regular basis. However, more than 40 times as many will die from base jumping and you’re 30 times more likely to die from extreme mountaineering than you are from base jumping. 

Some of these are less risky than you might think. For instance, you’re twice as likely to die from walking than you are from horseback riding, as the former puts you at risk of major pedestrian accidents. 

You’re also more likely to die from getting out of bed aged 45 than you are from SCUBA diving. So, assess the risks, try to look at your situation from the underwriter’s perspective, and make changes where necessary without giving up all the things that you enjoy.

Wait

You can apply for life insurance as soon as you lose weight or give up risky and dangerous activities. You can reap the benefits straight away when you do this, but the same can’t be said for everything. 

Smoking is a great example of this. If you quit smoking today, you will need to wait at least 12 months before that has an impact on your life insurance policy. It only makes sense when you consider the majority of short-term cessations will result in relapse

The underwriter also wants to protect their bottom line, because you won’t start feeling the health benefits until several months have passed and before that time elapses, you’re still a high risk for many diseases and conditions.

Look for Group Life Insurance 

If you can’t get life insurance by applying directly, you may be offered it through an employer. Group life insurance is offered to large groups of people and is typically provided by employers.

You probably won’t get the same extensive cover, but you will get some cover, and this is a great alternative if you’re struggling to seal the deal yourself.

Only Buy What You Need

It’s tempting to get a big payout when you’re buying life insurance as that payout can then provide a good life for your loved ones. But life insurance shouldn’t be like winning the lottery. It’s not designed to allow them to quit work and spend the rest of their lives sipping champagne on Mediterranean cruises.

The payout should cover all of their needs for several years, while also repaying any debts that you (or your loved ones) have. If you have a mortgage, it can also go towards repaying this.

Many life insurance experts recommend that you stick with the absolute basics in situations where the remaining family members can still support themselves. For instance, let’s suppose that you’re a 50-year man in relatively good health. You earn roughly the same money as your wife, but she’s 10 years younger than you and you also have a son at college and a mortgage with $50,000 left to pay.

In this case, the payout should be at least $50,000, plus the size of remaining debts. However, you don’t need to include all debts in this. Some debts, including all federal student loans, will die with you, which means your son or your wife won’t be burdened with them. For example, if you cosigned on a $20,000 federal student loan and also have $10,000 in joint credit card debt, a death benefit of $60,000 will be enough.

That way, your wife can clear the mortgage and debt in full, thus reducing monthly liabilities and putting more money in her pocket at the end of the money. If she ever faces a financial crisis, such as the loss of a job, she’ll have a fully paid house to use as collateral and can take loans and equity loans as needed.

This is the best way to provide for your family after your death without crippling your finances in the present.

And Finally, Take Your Time

The sooner you apply, the better. But that applies to years and not weeks, so don’t feel like you need to rush. If you’re not sure about the process and need a little advice, spend some more time reading through articles and guides and speaking with current policyholders.

Providing yourself with a little extra shopping time will also make it easier to compare and to find the best life insurance rates and the best payouts based on your specific budget and situation.

Source: pocketyourdollars.com

What Causes of Death are not Covered by Life Insurance?

  • Life Insurance

The death of a loved one is hard to take and while a life insurance payout can ease the burden and allow you to continue leaving comfortably, it won’t take the grief or the heartbreak away. What’s more, if that life insurance policy refuses to payout, it can make the situation even worse, adding more stress, anxiety, anger, and frustration to an already emotional period.

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But why would a life insurance claim be refused; what are the causes of death that may cause your life insurance coverage to become null and void? If you or a loved one has a life policy, this article could provide some essential information as we look at the reasons a death claim may be refused.

What Causes of Death are Not Covered?

The extent of your life insurance coverage will depend on your specific policy and this is something you should check when filing your life insurance application. Speak with your insurance agent, ask questions, and always do your due diligence so that you know what you’re buying into and what sort of deaths it will provide cover for.

Life insurance policies have something known as a contestability period, which typically lasts for 1 to 2 years and begins as soon as the policy starts. If the policyholder dies during this time, they will investigate and contest the death. 

This is generally true whether her you die of a heart attack, cancer or suicide. However, if this period has passed, they may only contest the death if it results from one of the following.

Suicide

Suicide is a contentious issue where life insurance is concerned. On the one hand, it’s a very serious issue and one that’s often the result of mental health problems, so there are those who believe it is deserving of the same respect as any other illness. 

On the other hand, the life insurance companies are concerned that allowing such coverage will encourage desperate people to kill themselves so their loved ones will be financially secure.

It’s a touchy subject, and that’s why many companies refuse to go anywhere near it. Some will outright refuse to pay out for suicide, but the majority have a suicide clause, whereby they only payout if the death occurs after a specific period of time.

If it occurs before this time, they may return the premiums or pay nothing at all. And if they have reason to believe that the policyholder took their own life just for financial gain, they will almost certainly investigate and may refuse to pay.

Dangerous Hobbies and Driving

If you die in a car accident and it is deemed that you were driving drunk, your policy may not payout. Car accident deaths are common, and this is a cause of death that policies do generally cover, but only when you weren’t doing something illegal or driving recklessly.

Deaths from extreme activities like bungee jumping or skydiving may be questioned, especially if these hobbies were not reported during the application. 

Illegal Acts

Your claim can be denied if you are committing an illegal act at the time of your death. This can include everything from being chased by the police to trespassing. A benefit may also be refused if you die for an intentional drug overdose using non-prescription drugs. 

Smoking or Pre-existing Health Issue

Honesty is key, and if you lie during the application or “forget” to tell them about your smoking status or pre-existing medical conditions, they may refuse to payout. It doesn’t matter if they performed a medical exam or not; the onus is not on them to spot your lie, it’s on you not to tell it in the first place.

This is one of the most common reasons for an insurance contract to be declared void, as applicants go in search of the cheapest premiums they can get and do everything they can to bring those costs down. They may also believe they will get away with their lies, either because they will give up smoking in a few months or years or because they will die from something other than their preexisting condition.

But lying in this manner is risky. You have to ask yourself whether it’s worth paying $100 a month for a valid policy that will payout without issue or $50 for a policy that will likely be refused and will cause endless stress for your beneficiaries.

War

Life insurance benefits generally don’t extend to the battlefield. If you’re a solider on the front line, your risk of death increases significantly, and many insurance policies won’t cover you for this. This is true even if you’re not in active duty at the time you take out the policy. More importantly, it also applies to correspondents and journalists.

You don’t invalidate your policy by going to a war-torn country and reporting, but if you die resulting from that trip, your policy will not payout.

Dismemberment

Your life insurance policy likely won’t pay for dismemberment or critical illness, but there are additional policies and add-ons that will provide cover. You can get these alongside permanent life insurance and term life insurance to provide you with more cover and peace of mind. 

They will come at a significant extra cost, but unlike traditional life insurance, they will payout when you are still alive and may make life easier after experiencing a tragic accident or serious illness.

We recommend focusing on getting life insurance first, securing the amount of coverage you need from a permanent or term life policy, and only then seeing if there is room in your budget for these additional options.

How Often Do Life Insurance Policies Payout?

We have recommended life insurance many times at PocketYourDollars and will continue to do so. We often state that it is essential if you have dependents and want to ensure they’re cared for when you die. But as much as we recommend it and as simple as the process of applying often is, there is one simple fact that we often overlook:

Life insurance companies rarely payout.

It’s a stat you may have seen elsewhere and it’s 100% true. However, contrary to what you might have heard or assumed; this is not the result of a refusal to pay the death benefit when the policyholder passes away. Sure, this accounts for some of those non-payments, but for the most part, it’s down to one of the following:

The Policyholder Survives the Term

The majority of life insurance policies are set to fixed terms, such as 10, 20 or 30 years. If anything happens during this period of time, your loved ones collect your death benefit, but if you survive, the policy ends, no money is paid out, and if you want another policy you will need to pay a larger sum.

The Policyholder Accepts the Cash Value

Whole life insurance policies are like investments crossed with life insurance. Your loved ones get a death benefit if you die, but it also accrues interest and can be cashed out. When this happens, the insurer collects, you get a sum of money, and it feels like a win-win, but in reality, the insurer has just dodged a bullet.

The Policyholder Stops Making Payments

As soon as you stop making your premium payments, you lose cover and you run the risk of your policy being canceled. This is true for pretty much any type of policy and it happens regardless of the policy term. 

Unlike a credit card company, which may chase you for payments, a life insurance company will place the burden of responsibility on you. After all, a creditor loses money when you don’t pay, whereas a life insurance company comes out on top.

This often happens when individuals take out substantial life insurance policies at a young age, only to suffer drastically changing circumstances. Imagine, for instance, that you’re 20-years-old and you buy a house with your spouse-to-be, with a view to settling down and starting a family. You assume that you’ll need it for a long time, so you take out a 30-year-term.

But 10 years down the line, your spouse leaves you, the family you wanted didn’t happen, and you’re all alone with no dependents, and with growing debts, bills, and obligations. At that point, life insurance becomes a burden, so you may stop making payments, thus allowing the insurance company to profit from 10 years of insurance premiums.

Summary: It’s Not That Cut-Throat

You don’t have to look far to find consumers who feel they have been wronged by life insurance companies, consumers who will expend a great deal of time and effort into calling out these companies for their perceived wrongdoings. But they often exaggerate the situation due to their extreme anger and this creates unrealistic anxieties and expectations.

The truth is, while there are people who have been genuinely wronged, they are in the extreme minority. The vast majority of family members who were refused a death benefit were let down by the policyholder and by the lies they told on their policy.

Policyholders lie about their weight, smoking status, and medical conditions, and when caught up in this lie, they often claim they made an honest mistake. But the truth is, most life insurance companies will overlook simple mistakes and only really care when it’s obvious that the policyholder lied. 

And let’s be honest, it doesn’t matter how forgetful you are, you’re not going to forget that you’re a chain smoker, alcoholic, drug user, extreme sports fan or that you recently had a medical crisis!

If the policy was filed honestly, you shouldn’t have an issue when you collect, even if it’s still in the contestability period. As discussed above, life insurance companies stack the dice in their favor. They use statistics and probability to carefully set the premiums and benefits, and they rely on policyholders forgetting to pay and outliving the term. They don’t need to “rob” you in order to make a profit. So, be honest when applying and you won’t have anything to fear.

Source: pocketyourdollars.com