There is no better time than right now to make plans to ensure your family’s financial security in the event of your death with an affordable, life insurance policy. HealthBenefitsUS is pleased to introduce you to the life insurance plans from several top insurance companies.
A one-time request for health coverage quotes can include a quote from $50,000 to over $2,000,000 in quality Life Insurance benefits tailored to fit your real life concerns and at rates lower than just four years ago.
WHY BUY LIFE INSURANCE?
Most financial experts consider life insurance to be bedrock for your financial planning.
If people depend on your income, life insurance can replace that income after your death. Your spouse, our children, dependent parents, siblings or others who rely on your financial support can be seriously effected financially as well as emotionally from their loss of you.
Life insurance is also used to cover funeral and burial costs, probate and estate administration costs, pay debts and the medical expenses not covered by your health insurance. Life insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance. Changes in the federal “death” tax rules between now and January 1, 2011 may reduce the impact of this tax on some people, but some states are offsetting those federal decreases with increases in their state level “death” taxes.
Life insurance is often the only inheritances to be passed on to heirs - those you name as your beneficiaries.
By making a charity the beneficiary of your life insurance, you can make a much major contribution to meaningful work you would like to see continued.
Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner’s request. Since most people make paying their life insurance policy premiums a high priority, buying a cash value type policy can create a kind of “forced” savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim).
TYPES OF LIFE INSURANCE
Life insurance for groups is not the same as life insurance for individuals.
TERM LIFE INSURANCE
This is the most basic form of life insurance. It pays when a death occurs during the term of the policy, normally from one to 30 years. Most term policies have no other benefit provisions.
There are two basic types of term life insurance policies — level term and decreasing term.
LEVEL TERM means the benefit is the same throughout the period covered by the policy.
DECREASING TERM means the amount of the benefit is reduced over time. Usually every year into the policy pays less to the beneficiary.
Almost all Term Life Insurance policies are written as Level Term. Only about 3% of policies are written for Decreasing Terms, but there are circumstances where it is a better choice for the consumer.
WHOLE LIFE INSURANCE (or PERMANENT)
Whole life (sometimes called permanent life insurance) includes several subcategories, including traditional whole life, universal life, variable life and variable universal life plans. Over half of the life insurance policies in effect in this country are Whole Life Insurance. Whole life/Permanent insurance pays a death benefit whenever you die — even if you live more than 100 years!
There are three major types of whole life or permanent life insurance — traditional whole life, universal life, and variable universal life. There are many variations within each of these groups to allow a policy to be tailored to exactly fit your family's needs.
Traditional whole life is designed to allow the death benefit and the premium to stay the same (level) for the life of the policy. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance as the policy holder lives longer. Instead of increasing the premium, companies maintain a level premium by charging a premium is higher than what’s needed to pay claims in the early years, investing that money, and then using the proceeds to supplement the level premium to pay the cost of life insurance for older people.
By law, when these “overpayments” reach a certain amount, they become available to the policy owner as a cash value if he or she decides not to continue with the original plan. "Cashing in" a life insurance policy is not an additional benefit - it is an alternative to maintaining the policy from its intended coverage and purpose.
Several years ago two variations on the traditional whole life product—universal life insurance and variable universal life insurance.
WHAT IS A BENEFICIARY?
A beneficiary is the person or entity you name in a life insurance policy to receive the death benefit. You can name one person, two or more people, a trustee, a charity or your estate. If you don’t name a beneficiary, the death benefit will be paid to your estate and subject to long proceedings and fees in probate court.
You will name your beneficiaries and should identify them precisely, usually using their social security number for identification. This makes it easier to locate them and eliminate many disputes on your intent. For example, if you write "wife [or husband] of the insured" without using a specific name, an ex-spouse could claim the death benefit. On the other hand, if you have named specific children, any later-born or adopted children will not receive the death benefit—unless you change the beneficiary designation to include them.
Remember, there are two “levels” of beneficiaries. Your policy should name both “primary” and “contingent” beneficiaries. The primary beneficiary gets the death benefits if he or she can be found after your death. Contingent beneficiaries get the death benefits if the primary beneficiary can’t be found. If no primary or contingent beneficiaries can be found, the death benefit will be paid to your estate.
In addition to naming beneficiaries, you will want to define what happens with your benefits if the beneficiary cannot be found. If you have two children and both are named as beneficiaries and one of those children should die before you do, you need to consider if you want the whole benefit to go to the surviving child, or to the deceased's heirs.
If the death benefit goes to your estate, probate proceedings could delay distributing the money, according to the decision of the probate court, and the cost of probate could diminish or eliminate the amount available to your heirs.
You will want to keep your list of beneficiaries up to date (marriages, addresses, social security number, etc.). A birth or adoption can change your distribution of benefits, as can a divorce or death.
WHAT IF MY CHILDREN ARE GROWN?
If your children are in college and/or not completely financially independent, life insurance can help “finish the job.” Although you may have saved enough for tuition, the kids’ living expenses (e.g., room and board, laundry, entertainment/activity costs, etc.) continue, but not Social Security benefit payments for the surviving spouse and children—they stop when the kids leave high school.
If you have parents, disabled adult children, or others who depend on you for financial support, life insurance would continue this support if you die before they do.
A recent study showed that 5 percent of married women ages 51-64 were poor, but 20 percent of widows that age were poor. This happens because many people don’t plan for life insurance to pay income to the surviving spouse after their kids are grown. As noted above, Social Security pays nothing from when the youngest child leaves high school until the surviving spouse applies for benefits based on the deceased spouse’s record (minimum age for eligibility is 60). This interval is called the “blackout period.”
If a survivor begins receiving Social Security survivor benefits earlier than the full-benefit age (66-67, depending on when the survivor was born), the Social Security benefit amount is permanently reduced. Moreover, because of the deceased’s early death, he or she did not get salary increases that might have boosted Social Security benefits further. A life insurance policy can help offset the effect of these “lost” raises.
Also, because of the deceased early death, he or she did not get salary increases that might have boosted employer pension benefits and/or IRA contributions. A life insurance policy can help offset the effect of these reduced retirement savings.
Most two-earner couples make financial commitments (e.g., home mortgage, loans, leases, etc.) based on their combined income. Life insurance on each earner enables the survivor to continue to meet those commitments.
Young people don’t generally plan to have savings available to pay for funeral and burial costs, final medical expenses, estate administration and transfer costs, and federal and state income and estate taxes. Life insurance can cover these costs, which can easily reach tens of thousands of dollars.
Conventional wisdom says each household should have an “emergency fund” equal to about half a year’s income, to meet surprise unavoidable outlays. If the household does not already have an emergency fund, the post-death family will be even more financially vulnerable without one. Furthermore, it might also be somewhat more difficult for the survivors to obtain credit. Life insurance can solve this problem.
When a couple retires and begins receiving Social Security retirement benefits, each one receives an income. The earner with the larger pre-retirement income gets a benefit based on that income, and the person with the smaller (or no) pre-retirement income gets either a benefit based on his or her own earnings record or half of the spouse’s Social Security benefit, whichever is greater. When one spouse dies, the larger retirement benefit continues but the second benefit stops—in effect, a 33 percent income reduction. Life insurance can offset this income drop.
If you want to be sure that your heirs and/or favorite charities get money after your death, you can designate some or all of your life insurance benefits to go to them. This is particularly useful if, without the life insurance, your executor would have to liquidate other assets to meet this objective.
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