Discuss the nature of life insurance

Purposes of life insurance Your need for life insurance will vary with your age and responsibilities. The amount of insurance you buy should depend on the standard of living you wish to assure your dependents. You should consider the amount of assets and sources of income available to your dependents when you pass away. Social security benefits, available cash and other sources of income and investments may not provide the standard of living you have in mind. Life insurance helps bridge the gap between the financial needs of your dependents and the amount available from other sources, is the amount to be provided by life insurance.

Distinguish among types of life insurance Level term - 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

Traditional whole life/permanent A type of life insurance contract that provides for insurance coverage of the contract holder for his/her entire life. Unlike term life insurance, which covers the contract holder until a specified age limit, a traditional whole life policy never runs out. Upon the inevitable death of the contract holder, the insurance payout is made to the contract's beneficiaries.

Variable life A form of permanent life insurance, Variable life insurance provides permanent protection to the beneficiary upon the death of the policy holder. This type of insurance is generally the most expensive type of cash-value insurance because it allows you to allocate a portion of your premium dollars to a separate account comprised of various instruments and investment funds within the insurance company's portfolio such stocks, bonds, equity funds, money market funds and bond funds.

Factors that influence the amount and type of life insurance purchased People buy life insurance to ensure that their beneficiaries have enough money to maintain their standard of living after the policyholder dies If no one depends on you financially, you might not need life insurance. If you have people or family who rely on you, you might want to have enough insurance for your family to pay your debts, and provide some income Income Situation

Decreasing term A type of annual renewable term life insurance that provides a death benefit that decreases at a predetermined rate over the life of the policy. Premiums are usually constant throughout the contract, and reductions in policy payout will typically occur monthly or annually. Term lengths can range anywhere between one and 30 years. The theory behind decreasing term insurance is that a person's need for high levels of insurance decreases with age and certain liabilities no longer exist. A big portion of the decreasing term insurance found today is in the form of mortgage life insurance, which pegs its benefit to the remaining mortgage on the insured' home.

Other Types of Life Insurance Credit life is a type of policy that lenders or borrowers buy to pay the balance of a loan in case the borrower dies before repayment. A bank or lender might require you to buy a credit life policy as a condition of a loan Credit accident and health coverage pays the balance of the loan if you get sick or injured and can't repay the loan. A creditor who requires this type of coverage will usually add the cost of the premium to your loan payments.

Other Types of Life Insurance Credit accident and health coverage pays the balance of the loan if you get sick or injured and can't repay the loan. A creditor who requires this type of coverage will usually add the cost of the premium to your loan payments. Prepaid funeral insurance is a special type of policy to pay for funeral services in advance. An advantage of this insurance is that it locks in the cost of the funeral at current prices.

Individual and group life insurance plans. Individual life insurance is bought by individuals and insures the life of one or more people in a single policy. This type of coverage gives you the most choice because you're free to shop among companies to find the policy that best meets your needs. Many companies sell individual policies with the features you need. Group life insurance is bought by employers, governmental entities, and other organizations, such as professional organizations, unions, churches, and fraternal groups, and insures a group of people under a single contract. State and federal laws restrict the companies' underwriting criteria for group policies. If you don't qualify for an individual policy because of age or health reasons, group life coverage might be a good option

Hobbies That Drive Up Term Life Insurance Rates It is a given that base jumping and hang gliding are dangerous stuff, but activities as common as skiing could be seen as a liability to insurance companies. Some dangerous activities which could affect your term life insurance rates are: Aviation Base jumping Bungee jumping Car/bike/powerboat racing Hang gliding Hot air ballooning Parachuting Rock climbing/mountaineering Scuba diving Skiing Skydiving Surfing White water rafting

Beneficiary information Selecting a beneficiary is a very personal decision. Some people want to use a death benefit to protect their loved ones, and other people look at it more as a financial transaction. Who will need extra money when you pass away? Are there people that count on you for financial support? People who will bear certain expenses at your death? These are good questions to ask when choosing your beneficiary.