Interesting Facts about Life Insurance

WHAT IS FINANCIAL SECURITY?
Financial security means different things to different people. For most of us, it means a comfortable standard of living. But maintaining your standard of living takes hard work...and money.

Although money can come from a number of sources, most of us rely on a pay-cheque. Have you thought about what could happen if you lost your job, or were ill and unable to work? For some people, Employment Insurance can help fill the gap and give you time to find another job. Losing your health or your life is a different story; it can be financially devastating. Worse yet, it can happen without warning.

Life Insurance Definitions

These days, there’s a lot of talk about investing. It’s wise to plan for retirement, but not at the expense of your overall financial security. Before you consider investing money elsewhere, you should have a sound insurance plan in place. It’s a core need, just like having an "emergency" savings fund.



Life Insurance is for PEOPLE WHO LIVE
It’s been said that "life insurance isn’t for the people who die, it’s for the people who live." Without your income, your family’s standard of living may be at risk.

If something were to happen to you, have you taken the necessary steps to get your financial affairs in order? Consider two different types of expenses:

WHAT WOULD YOU DO ABOUT IMMEDIATE EXPENSES
Immediate expenses such as funeral expenses, paying off debts, establishing an emergency fund for your family or providing an education fund for your children.

Ongoing expenses like providing income for your surviving family members or business partners. In reality, we don’t get a chance after we’re gone to get our affairs in order. We need to plan ahead and make these important decisions before it’s too late. That’s why it’s a good idea to talk with an independent advisor who can guide you through the process and help you get your affairs in order now.

Although life insurance may seem confusing at first glance there really are just two basic forms of coverage, Term and Permanent.

WHAT TYPE OF LIFE INSURANCE IS RIGHT FOR YOU?
There are many types of life insurance, so how do you know which is the right kind for you? If you are looking for pure insurance at the lowest cost, then Term insurance is usually the right choice. If you want to have a guaranteed death benefit for your entire life (up to age 100), then other forms of insurance like whole life, universal life and variable life may be the best option for you. The way life insurance is broken down is into two categories:
Term insurance that has a set premium for a set period of time or cash value insurance that has a death benefit until age 100.

With all types of insurance you are rated on your health, age and sex. When filling out a quote form please comment if you have any health issues or medications you are taking so that your quote will be as accurate as possible.

Term insurance is pure life insurance; it does not have any cash value and the premium is set for a specified period of time. You can usually get term insurance in five, ten, fifteen, twenty or thirty year intervals. There is also annually increasing term insurance but you may want to consider whole life instead (Talk to your licensed insurance provider about this when they contact you.). The reason people choose term insurance is because it is usually the cheapest life insurance you can buy. When the licensed insurance professional runs a quote for you they will have the option of up to thirty or forty companies to choose from. Their quote will come back with the best prices for your situation. You should also know that all quotes will come back with an annual premium, but you can usually pay your premium on a monthly, quarterly or semi-annual basis.


CASH VALUE INSURANCE
Whole life insurance, universal life insurance (UL) and variable universal life insurance (VUL) are your three main choices of cash value insurance. They all have cash value that grows tax free in them that you are entitled to borrow or take out when ever you want. But, remember that there may be surrender or interest charges and it may reduce your total death benefit.

WHOLE LIFE INSURANCE Whole life is similar to term insurance but it is permanent insurance so you are covered for your entire life. Instead of paying a lower premium for a term, they take the average of what it would cost you for insurance throughout your entire life and charge you that premium for your entire life. The cash value in the policy is invested by the insurance company you do not get to decide where to invest the money.

UNIVERSAL LIFE INSURANCE
Universal Life insurance is similar to whole life except you have a minimum and maximum premium payment; within that range is the premium you decide on. The cash value in your account will only grow off of what you put into it. If your cash value falls bellow a certain point your policy may lapse.

VARIABLE LIFE INSURANCE
Variable Universal Life insurance is like Universal Life except you also get some input into where your money is invested. Some people use these policies as an investment tool since you have a death benefit and tax free growth.

As the name implies, term insurance is designed to provide coverage for a specific number of years, or 'term'. When term insurance was first introduced to the marketplace, policies would expire at the end of the term or when the insured person reached age 65 or 70. Today, you can find term policies that will insure you until age 100.

The main advantage of purchasing term insurance is the low initial premiums. But you should keep in mind that most term policies have a set renewal period. At the end of this period, you'll need to 'renew' the policy at new premium rates. Since age is a major factor in pricing insurance, the cost of your insurance will most likely increase.

Term insurance can be used to cover a variety of insurance needs, such as a mortgage, personal or business loans or replacement of income after a death, to name just a few. Its real strength is in providing larger amounts of coverage at a lower cost. This can be especially important to a young family with small children where there is a need to provide financial security, at low cost, for the years when the children are financially dependent on their parents.

Term to age 100 insurance was developed in the early 1980s for people who wanted term insurance but who were concerned about losing their coverage at age 65 or 70. By eliminating policyholder access to the cash reserves that build up in a policy over the years, companies were able to reduce the premiums they needed to charge for this type of coverage. Today, due to improved conservation, mortality and lower long-term bond rates, the difference in premium between policies with and without cash and paid-up values has narrowed considerably.

One of the most popular forms of term insurance is 10-year renewable and convertible term. This type of policy will usually provide coverage until age 75. Because the premiums renew every ten years, the initial premiums are quite reasonable and they stay level for ten years at a time. Be sure to look for a guaranteed renewable term insurance plan so that you are guaranteed the right to renew your coverage for another term even if your health has deteriorated.

When considering purchasing a term policy, make sure that it can be converted to a permanent policy without having to re-apply and prove you are still in good health. This convertibility feature can be extremely valuable if you decide you want to keep your term insurance past the specified termination date.

You may find that a combination of different types of insurance may be required to provide the financial security you want for yourself and your family. This is where an independent advisor can help in designing a comprehensive insurance program.