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Reasons to buy Life Insurance

Mortage protection-Term life insurance can be used to pay off an outstanding mortgage balance. Just select a term that matches the length of your mortgage payment period.

Income Replacement-Life insurance can be used to replace the lost income so the survivor can maintain the same standard of living.

College Funding-Life insurance can help fund a college education. If you die, the death benefit may be invested and potentially grow to the needed amount by the time your children reach college age.

Final expences- Funeral expenses, burial costs and medical bills can add up to a hefty amount. The last thing you want is for your loved ones to shoulder this extra burden.Life insurance can be used to plan for these final expenses. Permanent life insurance is available in various amounts, so you can pick a death benefit that meets your needs.

Where Do You Buy It?

Buy at the office. Take advantage of group life insurance offered at minimal or no cost through your employer. Many companies, however, will only match an employee's salary. For more coverage, you can scan the supplemental coverage at work but make sure to shop around too.

How Life Insurance Works

Like other types of insurance, life insurance is protection against the unknown. When you buy life insurance, you're paying for the peace of mind that your family will be taken care of in the event of your sudden death. Some people call life insurance gambling. They think that you're throwing away a bunch of money on the off chance that you'll die young. But when life insurance is handled correctly, it isn't gambling at all. It's simply part of a larger economic plan whose goal is the financial security of your family.

Permanent Life Insurance

How Much Should You Have

Permanent Life Insurance- Permanent insurance provides lifelong protection, and the ability to accumulate cash value on a tax-deferred basis. Unlike term insurance, a permanent insurance policy will remain in force for as long as you continue to pay your premiums. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value.

The four types of permanent life insurance are whole, universal, variable, and variable-universal.

A large part of choosing a life insurance policy is determining how much money your dependents will need. Choosing the face value depends on:

-How much debt you have: All of your debts must be paid off in full, including car loans, mortgages, credit cards, loans, etc.

-Income Replacement: You will need a policy payout that is large enough to replace your income plus a little extra to guard against inflation

-Future Obligations: If you want to pay for your child's college tuition when you are gone, you will have to estimate the costs of those obligations and add them to the amount of coverage you want

-Insuring Others: As a rule, you should only insure people whose death would mean a financial loss to you.

Universal Life Insurance

Term Life Insurance

Universal life insurance is a type of permanent life insurance, primarily in the United States of America. Under the terms of the policy, the excess of premium payments above the current cost of insurance is credited to the cash value of the policy. The cash value is credited each month with interest, and the policy is debited each month by a cost of insurance (COI) charge, as well as any other policy charges and fees which are drawn from the cash value, even if no premium payment is made that month. Interest credited to the account is determined by the insurer, but has a contractual minimum rate .

Term Life Insurance- Term life insurance is often the most affordable coverage because it offers protection for a specific number of years. You may want to purchase a term life insurance policy to:

-Get valuable coverage at an affordable price

-Help cover specific financial responsibilities like a mortgage or college expenses

-Supplement a permanent policy or work policy

This provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires, coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments or conditions. If the life insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time.

Variable Life Insurance

Variable-Universal Life Insurance

Variable life insurance is a permanent life insurance policy with an investment component. The policy has a cash value account, which is invested in a number of sub-accounts available in the policy. A sub-account acts similar to a mutual fund, except it's only available within a variable life insurance policy. A typical variable life policy will have several sub-accounts to choose from, with some offering upwards of 50 different options.

Variable- Universal Life Insurance is a type of life insurance that builds a cash value. In a Variable- Universal Life, the cash value can be invested in a wide variety of separate accounts, similar to mutual funds, and the choice of which of the available separate accounts to use is entirely up to the contract owner. The 'variable' component in the name refers to this ability to invest in separate accounts whose values vary—they vary because they are invested in stock and/or bond markets. The 'universal' component in the name refers to the flexibility the owner has in making premium payments. The premiums can vary from nothing in a given month up to maximums defined by the Internal Revenue Code for life insurance

Whole Life Insurance

Whole life insurance, as the name implies, is a contract designed to provide protection over the insured’s entire lifetime. There are many types of whole life policies, but the oldest and still the most common type of whole life policy is ordinary level premium whole life insurance, or simply ordinary life. This form of insurance is also known as “straight life,” “traditional whole life,” or “continuous premium whole life.” If the term “whole life” is used alone, it is generally accepted that the reference is to ordinary level premium whole life as opposed to any other type of lifelong policy.

Underwriting Life Insurance

In its most basic sense, underwriting refers to the process of issuing insurance. In this process, an insurance underwriter will evaluate the risk and the potential exposure of a potential insured. During this evaluation, the underwriter will decide how much coverage the applicant should receive, as well as how much premium the insured should pay for the particular amount of coverage.

When underwriting an applicant, an insurance underwriter will therefore attempt to protect the insurance company’s book of business from risks that could cause a loss. With this in mind, it is possible that if an applicant for coverage presents too high of a risk to the insurer, he or she may be denied coverage altogether.

The criteria that are analyzed by a life insurance underwriter will typically include the following:

-Applicant’s current age

-Applicant’s gender (It should be noted that some states offer uni-sex insurance rates)

-Height and weight of the applicant

-Health history (in addition to family health history of the applicant’s parents and siblings

How Insurers Reduce Risk

Risk Financing

If you decide to retain your risk exposures, then you can either transfer that risk (ie. to an insurance company), or you retain that risk either voluntarily or involuntarily.

Risk Sharing

Insurance is appropriate if the loss will cause you or your loved ones a significant financial loss or inconvenience. Do keep in mind that in some instances, you are required to purchase insurance.

Life Insurance

Carson Sims and Brandon Richards

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