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Understanding Life Insurance Basics

Understanding Life Insurance Basics

It’s not a topic anyone particularly enjoys thinking about, but life insurance can be a crucial pillar of financial protection for those who mean the most to you. It helps ensure your loved ones are better able to meet their future expenses — no matter what should happen to you.

In return for your policy premium payments, the insurer promises to pay a predetermined benefit upon your passing. Your beneficiary can use the money toward whatever financial needs they may have at that time — or in the future. Depending on the provisions of your policy, your beneficiary may receive their benefit as a single lump-sum payment, a series of installment payments or by some other means. Here are some things the payout from a life insurance policy could be applied toward:

·         Paying off the mortgage on a family home.

·         Sending your children or grandchildren to college.

·         Supporting a favorite charitable cause.

·         Paying estate taxes.

·         Covering funeral expenses.

·         Helping your spouse pay everyday bills.

·         Providing for long term care.

·         Paying off student, credit card or other debt.

·         Protecting a business.

·         Supplementing retirement income.

But you have a number of decisions to make before you purchase a policy. First, you’ll have to choose between the two basic types of life insurance: term life and permanent life.

Term life insurance provides protection for a predetermined period of time: That could be 10, 20 or 30 years, for example. If the loss occurs within the period you’re covered for, your designated beneficiaries receive the benefit. If not, no benefit is paid out. You might be interested in this type of policy for income replacement prior to retirement or to provide care for your children until they become financially self-sufficient.

And you also have two options when it comes to permanent insurance: whole life or universal life insurance — with either able to provide lifetime coverage. Permanent life generally costs significantly more than term life policies, but it also accumulates cash value that you may even be able to borrow against should the need arise.

Whole life insurance coverage is more predictable as the premiums, rates of return and amount of benefit are guaranteed and fixed. These policies can be useful to help provide for longer term needs such as ongoing care for an adult child. Universal life insurance, on the other hand, can offer an adjustable death benefit as well as premiums, within certain parameters. Cash value growth is dependent on the interest rate climate, so it’s important to consider that potential impact when looking at this type of coverage. Finally, look into fees, no matter what type of policy you select.

Life insurance can be an important foundation of financial protection for your family. And while it may seem complicated, it doesn’t have to be. Your financial professional can explain the options available and help you determine which type of insurance best meets your needs and budget.

Source

https://www.investopedia.com/articles/pf/07/whole_universal.asp

Are You Underinsured?

Are You Underinsured?

Adequate insurance coverage is the foundation of a sound financial plan. No matter how well your investments perform, an unforeseen emergency such as a fire, theft or natural disaster may leave you completely unprepared not only to meet the financial needs of your retirement, but your immediate needs as well. This is why it’s vitally important that you review your homeowners and other insurance policies on at least an annual basis (and when your circumstances change) to make sure they’ll provide the coverage you need should such an event occur.

All too often, we take out a policy when we first purchase our home only to “set it and forget it” and continue to pay premiums year after year without ever stopping to understand what we’re actually paying for. The following are some questions you should ask yourself to see if you might be underinsured:

  1. Have building costs gone up since I took out my policy? If labor and material costs have increased since that time, you might find yourself underinsured should you have to file a claim to repair or rebuild your home.

  2. Have I made substantial home improvements? Maybe you’ve added on a master suite, a deck or home theater. If so, your policy should reflect the building costs to repair or replace such improvements should you ever have to file a claim.

  3. Have the value of my possessions increased? Things like new furniture, kitchen appliances or electronics may require increases to the coverage on your contents, which is usually determined by a percentage of home value. If your home value has stayed the same, but you have more valuable stuff in it, then you may need to raise your coverage.

  4. Have I acquired valuables excluded under my homeowners policy? Perhaps you’ve developed a new-found appreciation for modern art or antiques. These types of items and others often are excluded from your regular coverage and require additional riders to protect them. Be sure to ask if your policy covers reimbursement for full replacement value on all your possessions.

  5. Has my net worth significantly increased? Having greater assets may leave you more vulnerable in the event of a lawsuit or other loss. If this is the case, you may want to ask your insurance agent about a personal umbrella policy that provides additional coverage beyond what is offered in home and auto policies. Such coverage is often relatively inexpensive for the additional protection it provides.

  6. Is my home vulnerable to flooding? Many assume that flood damage is covered under their regular homeowners insurance, when it actually requires a special policy issued by FEMA. Your agent can help you determine whether your house is located in a flood zone.

Being underinsured can put you and your family in a precarious situation should the unthinkable happen. Be sure to review your current policies with a qualified insurance agent periodically, or when your circumstances change so that you can make the necessary adjustments to protect you and the ones you love.

#insurance #retirement #wellcents #policies #lifeinsurance #disabilityinsurance.


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