Do you have cash value life insurance?
Mary was determined not to let it happen to her family.
When Mary and her siblings were children, their father died. Mary wished that her mother could have attended her activities, but her mother was often too busy working two jobs to support her family.
Mary did not want to have the same misfortune as her mother, so she insisted that her husband buy adequate life insurance to protect her and her children.
“The unfortunate truth is that most people have too little insurance,” Kimberly Lankford, author of The Insurance Maze, says. “Any coverage you have through work usually isn’t enough and disappears when you leave your job. You need to buy a policy on your own, and now is a great time to do it. Prices are extraordinarily low, and even if you already have life insurance, you may be able to find a much better deal by shopping around now.”
How does life insurance work?
The premise of life insurance is very simple. A person known as the owner buys a policy in which he or she makes the assumption that a certain person, known as the insured, will die at some point during the existence of the policy. The owner may be the same or different person from the insured. The life insurance company makes the assumption that the insured will not die during the length of the policy.
If the insurance company loses the bet, it pays an amount specified in the insurance agreement known as the face amount. The money is paid to those who are identified in the policy as beneficiaries. On the other hand, if the insured does not die while the policy is in effect, the company keeps the premiums that have been paid.
From there, life insurance becomes a bit more complex, but in most instances it is a purchase of compassion. The insured usually gets nothing more than the peace of mind knowing that he or she has provided for their dependents.
Two types of life insurance
The two primary types of life insurance you can buy are called term and permanent or cash value.
1) Term insurance – Covers only part of your lifetime. You buy coverage for a certain length of time, for example, 10, 20 or 30 years. These policies are ideal for people who need insurance for only a specific period of time, such as until their children graduate from college or until they can pay off their mortgage.
2) Permanent or cash value – Some of the premium you pay buys insurance and the rest goes into an investment account, called the cash value. The premiums can be much higher than for term insurance, sometimes ten times higher. You many want to consider permanent or cash value life insurance if you need coverage for more than 30 years.
Further, there are three different kinds of cash value policies: variable universal life, universal life, and whole life. To get a complete understanding of the distinctions among all of these policies and to decide which is best for you, be sure to consult with your life insurance agent.
Getting the advice of a life insurance agent before making a decision will help you satisfactorily answer the following two questions:
1) With the recent shakeup in the insurance industry, how will I know that my insurance company will be there for the next 10, 20 or 30 years? I will want to know that the company to which I have paid hundreds or thousands of dollars in premiums will still be there when I need them. Your agent can explain how you will be protected if something happens to your company, like if your state has a guaranty fund.
2) What is the track record for an insurance company in paying its beneficiaries?
Get professional insurance advice
“People tend to make big mistakes when buying life insurance,” Kimberly Lankford continues, “They don’t buy enough, buy the wrong kind of coverage, purchase coverage they don’t need, or pay too much for a policy.”
Insurance needs and laws are complex. Coverage varies wildly from company to company. Laws are vastly different from state to state. Your independent agent knows the laws and companies that provide coverage options. They can help you match what you can afford to pay with a prudent insurance plan.
Don’t try to handle your insurance needs without a life insurance independent agent you trust.
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Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.
While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.