Life insurance gives you peace of mind and helps provide support for those who depend on you. It can help pay funeral costs, debts, and living expenses.
If you miss a payment, most policies have a grace period to allow you to pay the premium and avoid having your policy lapse. Some policies even accumulate cash value. Visit their Website to learn more.
Life insurance provides a lump sum, known as the death benefit, to your nominee upon your death. It can help cover funeral costs, pay off a mortgage or car loan and provide income for your family to help them maintain their standard of living following your death.
In addition, some policies offer a cash value component that can accumulate tax-deferred. Depending on the policy type, this may allow you to withdraw or borrow from the accumulated funds in order to offset your premium payments, invest the cash value or simply leave it in the account with the insurance company to earn interest.
The amount of coverage you need depends on your financial goals and other resources. Term life policies are typically the best choice for younger individuals as they can offer a larger death benefit at lower premiums. However, permanent plans can give you a more comprehensive range of benefits and the peace of mind that comes with knowing your loved ones will be taken care of even after you’re gone.
Some life insurers also sell final expense policies that are designed to help beneficiaries avoid a financial crisis when a family member dies. These policies usually have low coverage amounts and relatively inexpensive monthly premiums, but they can help your beneficiaries cover funeral costs and other expenses.
Some whole life policies pay out dividends, which you can use to reduce your premium or add to your cash value. Dividends and the additional paid up insurance purchased with them are automatically added to your death benefit, but they are not included in your total face value and may change annually. Other policies, such as indexed universal life or variable universal life, may have investment subaccounts that you can select and manage.
Coverage options
Many people buy life insurance to help their loved ones cover expenses they might incur in the event of their death. This can include debt, funeral costs and income replacement. It’s important to consider all the possible expenses and determine how much coverage is needed to meet them. You can use online calculators to get an estimate.
There are different types of life insurance available, including term and permanent. Term policies offer coverage for a set period of time, usually 10 or 30 years. This type of policy is typically less expensive than a permanent policy.
Permanent life insurance provides coverage for the rest of your life, as long as you continue to pay premiums. It also builds cash value and may have investment options. You can choose a nonparticipating policy that sets its premiums, death benefits and cash surrender values at the time of purchase or a participating policy that allows you to share in the insurer’s financial performance by allowing you to reduce your premium payments or invest the cash surrender value in additional insurance.
Another common type of permanent life insurance is final expense coverage, which pays out a small death benefit to cover funeral and other end-of-life expenses. It’s often cheaper than other permanent policies and doesn’t require a medical exam.
Some life insurance policies come with riders, which are additions that can add to the death benefit or other policy features. For example, a rider may be added to a term life policy to allow the beneficiary to access a portion of the death benefit in advance of your death. You can find out more about available riders by speaking with an agent.
Premiums
Whether you purchase a term policy with a fixed length or a permanent plan that offers lifelong protection, timely premium payments are crucial for maintaining coverage. These payments are calculated in part based on the insurer’s evaluation of your life expectancy, which includes factors like age, sex, health history and occupation.
In addition, a portion of your premium might go towards the insurance provider’s operating expenses. Insurers are required to keep a certain amount of cash reserves on hand to cover outstanding liabilities and ensure that beneficiaries receive the payouts they’re owed.
Aside from these fees, your premiums are influenced by other factors that you can control. For example, limiting high-risk hobbies (like riding motorcycles or rock climbing) can help you present yourself as a lower risk to insurers and may lower your premium costs. Similarly, opting to pay your premiums annually instead of monthly can save you money due to reduced processing fees.
Depending on the type of policy you choose, you can also adjust the premium to better suit your financial needs. For instance, some whole life policies offer a limited-pay option that allows you to pay a higher premium than necessary in the first few years to boost your policy’s accumulated cash value. In addition, many whole life policies with a variable premium allow you to increase or decrease your premium payment to align it with your changing financial goals. However, you should note that if you withdraw more than you paid in premiums, your policy might lapse. This may require you to pay a surrender fee and could affect your taxes. For these reasons, it’s best to consult a financial adviser before making any changes to your life insurance.
Lapsing
The lapse of life insurance occurs when a policy goes unpaid. This is a common problem for people with whole or term life policies. If a life insurance policy lapses, the beneficiaries will not receive the death benefit and may be left with a large financial loss. Fortunately, there are ways to prevent a policy from lapsing.
One way to avoid a lapse is to set up automatic payments from your bank account or credit card to pay the premiums. This will prevent you from forgetting a payment and incurring a late fee. Another option is to use dividends from your policy to pay premiums. If you have a permanent life insurance policy that pays dividends, you can use them to make premium payments.
Some life insurance companies offer a grace period of 30 days after your policy’s premium due date. If you miss a payment, you can still keep your policy in force by making the missed payment during the grace period. If you miss a payment after the grace period has passed, your policy will lapse.
If you have a lapsed life insurance policy, it’s important to contact your life insurer as soon as possible. Some companies will reinstate your policy if you make up your back payment and pay interest. However, this will depend on the life insurance company and type of policy.
Life insurance is a long-term commitment to provide financial security for your family after you pass away. Taking steps to prevent a policy from lapsing will ensure your family is protected if the worst happens. To learn more about how to keep your policy from lapse, speak with an independent agent.
Reinstatement
Reinstatement is the process by which an insurance policy that has lapsed can be restored. Insurance providers will usually allow a grace period before the policy lapses and then require the insured to submit evidence of eligibility such as a medical examination or a completed application form. In addition, they may also be required to pay any back premiums that are owed. These requirements vary by insurer and the type of insurance policy.
Individuals and businesses purchase insurance policies to protect themselves from damage or loss from specific perils, such as fires and floods. These policies have a maximum amount that can be recouped by the insured, which is known as the coverage limit. In the event of a loss or damage, a claim can be filed to receive money from the insurer to cover the cost. However, a single loss or damage can lead to multiple claims and the insurance company may decide to cancel the policy as a result.
In order to avoid such a situation, individuals and businesses should make sure that their policy has a reinstatement clause. This clause will stipulate when the policy can be renewed after a claim has been paid out. It will also indicate whether or not the coverage limit is reset after a claim has been made.
General insurance policies that have a lapsed can be reinstated, but the requirements are often more stringent than those for life insurance. Depending on the length of time that has passed since the lapse and the type of policy, the insured may need to go through a full underwriting process. This can include answering questions about their health, undergoing a medical exam, and submitting a signed declaration that they are not aware of any losses or claims that occurred during the lapsed period.