Purchasing life insurance can seem like a daunting task, but taking the time to understand how life insurance works before making a decision will save you time and money in the long run.
Life insurance is a financial planning tool intended to protect your loved ones financially in the case of your death, offering you peace of mind no matter your current situation. Therefore, it’s important to select an appropriate policy with sufficient coverage.
Whether you are thinking ahead and browsing policies for the future or are ready to buy now, Insurify’s free, user-friendly platform allows you to compare quotes from top life insurance coverage providers in just a few minutes.
When you purchase a life insurance policy, you appoint beneficiaries who will receive the life insurance payout. These people are typically family members but can be business partners or even friends. Life insurance covers most causes of death, from illness to accidents. However, in some cases, such as suicide in the first two years of a policy or application fraud, the insurance provider may not cover it and decline to pay out the death benefit.
Though different types of life insurance exist—such as variable, universal, and term life—the main idea is pretty simple: as long as you pay your premiums, your insurer will pay out the life insurance benefits to your designated beneficiaries if you pass away. Typically, you can pay your premiums monthly, twice a year, or annually. Paying the premium is very important; if you stop paying, you could lose coverage and be forced to reapply. This not only leaves you uninsured, but your rates will probably increase because you will be reapplying as an older person.
The death benefit is typically given as a tax-free lump sum with no strings attached. Because of this, beneficiaries can use it for whatever they need, from final expenses and funeral expenses to mortgage payments and college tuition costs.
The amount of coverage needed depends on your current financial obligations and the standard of living you want to give your loved ones after you have passed. To calculate the coverage amount, you need to add up all of your current and shared debts as well as the amount of money you want your beneficiaries to have for future expenses.
For example, if you have children that want to go to college and you plan to pay tuition, you will want to make sure your death benefit is large enough to cover that cost in your absence. If it doesn’t, your children might have to take out loans or forgo higher education.
Depending on your needs, you can choose between five different types of life insurance. Some are more expensive and comprehensive while others are cheaper and more bare-bones. Keep in mind that you can change the type of policy if your life circumstances call for it. However, it’s best to keep the same policy as long as you can because getting a new one later in life is typically more expensive.
If you’re interested in learning more, be sure to read up on how term and whole life insurance can differ based on their varying features and requirements.
Adding a rider to your insurance policy is a way to modify the coverage or terms of the agreement. Typically, riders add coverage for an added cost. However, exclusionary riders restrict coverage for named conditions. These are less common, but do exist.
Three common types of riders are:
The cost of life insurance varies widely from person to person. The larger the death benefit you want, the higher premiums you will pay. The best chance to lock in a good life insurance rate is by purchasing a life insurance policy when you are young. Young, healthy people pay significantly cheaper premium payments for their insurance products because they theoretically have more years ahead of them in which to keep paying.
The different types of life insurance also differ in affordability. Term life insurance is the most affordable because it only covers you for a set number of years (the policy “term”). Whole life insurance is more expensive than term insurance because it is a form of permanent life insurance. So, even though you pay premiums for your entire life with a whole life policy, it is more expensive due to its permanence and cash-value component.
Whatever policy you buy, though, make sure to look for life insurance discounts from your life insurance company. Life insurance companies won’t usually come right out and offer them to you, but if you do your research, you could end up saving a lot of money. You can get discounts for everything from not smoking and being married to owning a home or belonging to AARP.
Paying for life insurance can be a bit tricky, though. Most carriers accept electronic funds transfers and checks. Some accept credit cards or debit cards, but this is less common. The high fees and state-specific regulations are common reasons providers don’t accept credit cards. If you know you would like to pay for life insurance by way of recurring online payments, be sure to have your bank account number and routing number when you apply.
To get a life insurance policy, you will have to follow the basic steps:
It’s up to you whether or not you want to speak with a licensed life insurance agent who can help you along each step of the journey.
If you are the beneficiary of someone with a life insurance policy, you may be wondering how to file a claim in the case of their passing. To begin the process, you will need three documents: the policyholder’s death certificate or certified copies of it, the policy document, and the claim form.
The insurance company needs the death certificate to ensure that your claim for the death benefit is legitimate. The policy document has all the information about the life insurance policy, which informs you and the insurance company as to what you’re entitled to. The claim form is what you will fill out in order to request your benefits. Once the claim has been submitted, the settlement funds should be issued within a few weeks.
If you are just getting started exploring possible policies, Insurify’s life insurance quotes comparison platform can help you get quotes from multiple providers and compare them all in one place.