money management

What You Need to Know About Life Insurance

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Think that life insurance is a cut and dry top? Well, think again! The only aspect of life insurance that is actually simple is that you need to have it. When it comes to the type, coverage, deductible, and payouts, then you step into a whole new world of options and possibilities. Some people often delay the conversation of life insurance because they simply don’t like the thought of dying, and I can’t blame them. There is nothing comfortable about discussing one’s untimely demise. Then there are others who simple lack any sort of knowledge and education on life insurance, and thus steer clear of put pen to paper regarding a policy. Regardless of your reasons, not having life insurance in this day and age is simply not an option. Leaving loves ones behind can be hard enough on them and they don’t need to added struggle of worrying about financial security for the rest of their lives.

Types of Life Insurance

The two main types of life insurance are term and whole. The more suitable option depends on who you are and what you want. At its simplest definition, term life insurance is defined for a period of time, hence the word term. Often times the premiums and the payouts stay the same over the defined period of time, but eventually there is an expiration date on the policy. If you have one of these policies you want to make sure you are cognizant of the expiration date so that you don’t have a lapse in coverage. Then we have whole life insurance. This is often defined as “protection for a lifetime”. It is also often referred to as permanent life insurance and covers you throughout the duration of your life. Because of the extended period of coverage it tends to be much more expensive for the same level of payout. These policies can also carry a cash value as well.  One popular example of permanent coverage is burial insurance.  These policies have gained in popularity due to consumers knowing that life insurance will pay out at time of death to their beneficiary.

Tax Impact

The tax implications carried by life insurance policies depend on a few different factors. First, what country do you reside in? Second, are your insured or the beneficiary? For now, let’s assume you reside in the United States of America like myself, and let’s also assume you are the policy holder. You are most likely making monthly or annual insurance premium payments to the insurer. Most times these premiums are not tax deductible, and you pay for them with after-tax money just like anything else in life. Then there is the beneficiary point of view. They will most likely receive a payout that is not subject to tax. It’s the one time the government seems to allow a payout without taxation.

However, there are exceptions to this rule as well. If the policy is paid out to the “estate” of the deceased then not only is it subjected to state and federal inheritance taxes but it could also be subjected to pending lawsuits and liens against the policy holder before their deaths. Often times it behooves all parties involved to ensure that the beneficiary is that of the individual or individuals that you desire to receive the money in the event of your death.

No Exam Life Insurance

Perhaps it seems like a fable or a myth, but it’s actually quite true, you can obtain life insurance without the exam. There are many reasons people choose to purchase life insurance without an exam. They may worry, perhaps even needlessly, about what a medical exam might turn up. Others might simply be busy and pressed for time. Some just don’t feel like passing through one more obstacle in their lives. No exam life insurance can be quite easy to obtain, and at affordable premiums that suit your budget. The best part is that you can get a quote, sign-up, and obtain insurance online and from the comfort of your own home.

The one important thing to remember with this type of insurance is that honesty does count. The insurer is taking you at your word. Which means you generally need to be in good health when taking out the policy. Also, failure to disclose pre-existing conditions can result in voiding your policy upon death. The last thing you want is your family to suffer your loss and a financial loss all at the same time. Be honest with the company because it’s the right thing to do and will give you absolute peace of mind. You also have the option of shopping around various companies within a fairly short amount of time and all from your home computer.

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