Life Insurance and Policies : Insurance is an effective weapon which is used to deal with the possibility of loss in future. We all do not know what will happen tomorrow, we do not know what kind of accident will happen in our life next. That's why we try to cover potential losses in future through an insurance policy. Insurance means protection against risk. If you take life insurance from an insurance company, then that insurance company will compensate you for the financial loss.
In reality, insurance is a contract between insurance company and the insurance holder for those bad times that could happen in the future. Under this contract, the insurance company takes a certain amount (premium) from the insured and compensates the insured person or the company for any loss caused as per the terms of the policy. Similarly, if the insurance company has insured a business, car, bike, house or smartphone, then in case of loss, breakage or damage to the item, the insurance company compensates its owner as per a pre-determined condition.
What is the Types of Insurance?
We usually get only two types of insurance in our life, we get life insurance or insure any matter related to us, in both we only want protection. Hence the insurance is divided into two parts-
1. Life Insurance
2. General Insurance
Life of a person is insured in life insurance. The advantage of life insurance is that if the buyer of the insurance dies suddenly due to any reason, then the insurance company gives compensation to his nominee according to the terms and conditions of the insurance. Suppose if the head of the family or the breadwinner of the household dies, then how will the expenses of that household go? How will the household expenses be met? How will the life of wife/child/parents go? It is absolutely certain that there will be a financial crisis so in financial planning, first of all a person is suggested to buy a life insurance policy.
In General Insurance includes all vehicles, houses, animals farming, crops, mobile phone, etc. If you insure your car, house, animal farming and fish farming with a general insurance company, then your these things are protected in this. After buying an insurance policy, if there is any kind of damage to your insured, then the insurance company gives the damages.
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What is Life Insurance?
If life insurance is to be said in very few words, then "the companion of such bad times when no one supports". A small amount deposited during your earning, called premium, will be companion of tough time.
Contract between an insurance company and an insured is called Life insurance. According to life insurance policies, if any types of accident happens to the policyholder in which death happen, the insurance company pays a sum assured to his nominee (family member).
A life insurance policy is a contract between an individual and an insurance provider, in which the insurance company pays the financial protection to the policyholder.
Based on this arrangement, on the death or major accident of the policyholder or , if the policy matures, after some time, the insurance provider pays a lump sum amount to that person or his family. So many types of life life insurance policies available in the market to suit the individual demands and needs of the policy buyer.
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Types of Life Insurance
Life insurance has some problems because often people do not read all the terms and conditions, important terms and conditions are written in very small letters, which are often ignored by people.
Therefore, before taking a policy, read and understand the term and condition. Understanding life insurance is like a jargon of words, to understand that we define something here-
1. Permanent Life Insurance
2. Whole Life Insurance
3. Universal Life Insurance
4. Indexed Universal Life Insurance
5. Variable Life Insurance
6. Term Life Insurance
7. No-Exam Life Insurance
8. Death Benefit Insurance
9. Cash Value
10. Money-back policy
11. Child Life Insurance Plan
12. Retirement Life Insurance Plans
➤Permanent Life Insurance: A range of long-term coverage that includes whole life and universal life policy types. It is more expensive than other life insurance but offer more benefits. This category is sometimes called cash value life insurance because a cash value account such as savings is built into the policy.
➤Whole Life Insurance: This policy provide the guarantees consistent premium and accumulation of cash value. This policy type may be eligible for dividends from a mutual company and is usually expensive. Whole life insurance plans cover the insured for the whole life or till the age of 100 years. While buying a whole life insurance plan, the sum assured is fixed. You also need to choose a nominee while buying whole life insurance. Bonus or benefit can be paid to the nominee after the any unfortunate event of death claim of policy holder. However, if the insured survives beyond 100 years, the insurance provider pays a maturity benefit equal to the endowment corpus (amount) to the life insured.
➤Universal Life Insurance: As per policy it ia a type of permanent coverage that creates cash value. In this policy the premium is often kept flexible which covers the cash value and death benefits.
➤Indexed Universal Life Insurance: This is a policy which is based on the performance of a specific market and that accumulates cash value such as the S&P 500. This type of policy is generally less expensive and less risky than a convertible policy because there is no actual investment in an index.
➤Variable Life Insurance: A type of permanent policy that combines cash value with multiple investment options. These types of options can be based on whole life or universal life coverage.
➤Term Life Insurance: A life insurance policy that covers the policyholder for a predetermined term, usually five to 30 years. When the term expires, there is no benefit to the policy. Although no cash value is accumulated, premiums for term life policies are usually much lower than premiums for permanent life policies.
Term life insurance plan is also called the purest form of life insurance. This plan provides you life cover but without any saving or profit. This insurance type is the most economical life insurance as its premiums are very cheaper as compared to other life insurance plans.
➤No-Exam Life Insurance: A life insurance policy that does not require any types of medical examination of policy buyer, thus expediting the approval process.
➤Death Benefit Insurance: Money that the life insurance company pays to your beneficiaries after your death. This is often a tax-free payment that can be paid in a lump sum or in installments, depending on your policy, and is usually only disbursed when your premiums are paid. Whenever we apply for a policy, we often choose the amount of the death benefit, this is also known as our coverage level, although some policies allow you to change this amount later.
➤Cash Value: The life insurance company sets aside a portion of the premium in a separate account after paying administrative fees and other expenses.. In general, this money grows tax-deferred based on a fixed rate, market index, or other investment.
➤Money-back policy: This life insurance policy is somewhat different from other policies, this is a short term policy in which a portion of the sum assured is paid directly to the insured person at regular intervals. In this life insurance policy the policyholder can achieve short term financial benefits.
➤Child Life Insurance Plan : The benefits of child life insurance plan is to build a heavy amount for the future development of the child. This life insurance plan is very beneficial for children's education or girl's marriage..
In this plan, after a certain age of the children, the insurance company provides annual or one-time money. If the insured parent dies during the policy term – all future premiums are waived off and the policy benefits continue uninterrupted.
➤Retirement Life Insurance Plans : Retirement life insurance plan helps in building a stable financial source for the retirement years of an individual. This plan saves man from financial crisis in old age and helps man to live his life without any worries. Most retirement life insurance plans offer annual payments on completion of 60 years or lump sum payment through conversion of accumulated corpus up to a specified limit. In case of a possible event during the policy term the insurer pays the insurance benefit to the family.
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Why do we need life insurance?
Often people save some money during their job or business and deposit it with the insurance company as a premium. After a period of time, when their plan is completed, a full amount is provided to them by the insurance company according to the terms and conditions of the insurance. The insured person or his family gets a lot of benefits when the insurance company provides a lump sum amount.
But those who are not able to buy any life insurance policy during their job or business, they neither secure their life nor their family. Such people do not get any financial support in old age and their family does not get any benefit after any accident.
You must have life insurance if:
➤The life of your family members or yourself depends entirely on your earnings.
➤If you want funds for successful life and education of your young children or for marriage, then you should take an insurance policy.
➤We all have small children who need help for a long time, insurance policy is very useful to help those children in case of sudden death.
➤Your spouse or your parents or children will not be able to support themselves financially without your income.
➤If you are a business owner or have a good job then you must take a life insurance policy.
➤You have too much debt you must take a life insurance policy.
➤You do not have enough savings to meet all your debts and final expenses.
➤If you want to leave an inheritance for someone after your death. You can also designate a charity as your beneficiary.
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Benefits of a life insurance plan
As much as I have studied deeply about life insurance, according to my knowledge there are three main advantages of life insurance. So if you take a life insurance policy then you have to know about 3 major benefits.
1. Security : We all knows that nature of life is unpredictable and can be full of uncertainties. We also know that it is impossible to ignore the possibility of an sudden event like death. In such circumstances, any family can faces financial problems due to lack of a consistent income.
If you invest in life insurance policy from the very beginning in your life, then it can be very easy to deal with such situations. The insurance provider is bound to pay a pre-determined sum insured if there is a sudden unforeseen event in life such as the death of the policyholder. In such a situation, life insurance proves to be very useful and the family remains safe even when the policyholder is not there.
2. Long Term Savings : If a person wants to make long term investment then it is important to consider suitable life insurance policy. This type of life insurance policy builds savings with you after a long period of time i.e. you get accumulated a lot of money which can be used for various reasons like building a new house, for good education your child, and marriage expenses.
As mentioned above, some life insurance policies offer monthly payouts on maturity which is an ideal way to achieve retirement goals.
3. Investment Options : Unit Linked Insurance Plans (ULIPs) life insurance providers primarily a means of investment. These life insurance policies are market linked which provide significant returns during maturity, hence a ULIP is a reliable life insurance plan to invest in.
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How much life insurance is needed?
It is also important to evaluate how much life insurance cover you actually need before taking life insurance. How much life insurance do you need, it depends on how many dependents you have, what is your income and budget, you can also measure your Human Life Value (HLV) by estimating how much money your family will need to be financially stable in your absence, apart from all these things, you also have to take care of some other things which are going to be told below:
➤Number of dependent on your income : Without ignoring any person, you have to prepare a list that how many people are dependent on your income. Spouses, children, and parents also have to consider. You have to buy life insurance by estimating the number of dependents and they should not faces the financial trouble in your absence.
➤How long will they depend on your income? : While children often become self-sufficient after college and do not need the additional income once the spouse begins to use their retirement, this is not always the case. How you answer this question will help determine which type of permanent or term insurance would be best suited for you.
➤How many major expenses do you want to pay with the amount received from life insurance? : Common expenses include paying off the mortgage on the family home, sending the child to college or helping with the child's marriage.
➤Which other loans do you want to cover? : Some debts held in your name may disappear after your death, but you may want to pay off debts held jointly with your spouse or estate taxes that can be passed on to your heirs.
➤What end of life do you want to pay for? : This may include funeral expenses or medical bills for a long illness.
➤What properties do you currently own? : The amount and assets you own will help determine what level of coverage you will need. Make a list of assets such as cash accounts, real estate, investment accounts, other life insurance policies and retirement accounts. These are all assets that can help support your beneficiaries.
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How to choose the right life insurance policy?
You have to keep some important things in mind to choose the right life insurance. Often people are not aware about life insurance policies and they are not able to buy the right life insurance by falling into the trap of words. Buy life insurance by following the instructions given by me which guides you in the right direction.
1. Contact Insurance Consultant : Even if you all do not like this thing very much, but often life insurance experts say that it is very important to take advice a reliable and knowledgeable insurance advisor or provider while planning to take a life insurance. Often people do not have much knowledge about life insurance, so they are not able to choose the right life insurance according to a need. Often people get caught up in the words of life insurance and choose the wrong life insurance.
2. Evaluate Life Insurance Cover : The life insurance provider helps you calculate your life cover amount as per your premium. Life insurance providers calculate preferred life cover by assessing your sources of income, number of dependents, any liabilities and your expenses. Life insurance providers also advise you to choose the best one from the life insurance plans, you choose as per your premium paying ability.
3. Compare Life Insurance Plans : There are various types of life insurance providers in the market that offer different types of life insurance policies, now it is up to you to carefully choose the most suitable life insurance for you from the available options. You have to compare different life insurance plans to avail life insurance according to your needs, it is important to compare all the policies before buying life insurance.
If you are planning to buy life insurance then all of you have to follow these 8-steps-
1. First you decide whether you need life insurance or not.
2. If needed then determine what type of life insurance is right for you.
3. You have to decide that how much life insurance you need.
4. Choose a suitable life insurance policy according to your needs.
5. You choose a right and reliable life insurance company.
6. Find the right and reliable life insurance agent or broker.
7. Find the right and reliable life insurance riders.
8. Buy life insurance policy only after taking complete information.
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Make a decision about the need for life insurance
Before buying life insurance, you have to consider whether you need it or not? Life insurance is usually designed to provide financial support for your dependents after your death. There are many types of life insurance, in which it is also done to continue a business or charity. After death, it is also done for the continuation of children education, spouse/parents or children for their successful life. If none of these responsibility is on you then I think you do not need to buy life insurance policy.
Choose a life insurance policy if necessary
Before buying life insurance, check the policy of the same company or the policy of different company. Comparing different policies can help in knowing which is the better policy as per your requirement. While comparing, you also need to keep in mind that you are comparing same type of policies.
When you have decided to take policies, then also think about some important questions. When you have decided to take policies, then also think about some important questions:
1. Do the premiums for the policy you choose increase on a guaranteed-level, flexible, or periodic basis?
2. Are the policy fees being charged along with your premium?
3. Is medical examination required in the process of taking the policy?
4. Is the policy approval process properly underwritten, simplified issue, or guaranteed issue?
5. Is life insurance available for the period you need?
6. Can one term life insurance policy be converted to another policy later?
7. If cash value accrues, how much and how?
8. Is the policy eligible for dividend?
9. Are the riders you want available?
Select a Life Insurance Company
Although value may not be the primary consideration in choosing a life insurance company and policy, it is always helpful to know what you get for your money. Your premium may not have much to do with the amount of coverage, but your insurance company calculates it carefully.
All the insurance companies use their own algorithm and prepare the coverage in their own way. While taking life insurance, you will need to know the algorithm and coverage policy of the insurance provider properly. Also, get complete information about what is the financial rating of life insurance provider.
Select the correct Life Insurance Riders
An insurance rider is a provision of an insurance policy which generally adds benefits but also adds some restrictions. Riders are a way to customize coverage and tailor the policy to your individual needs. Insurance rider arrange to add cost to an insurance policy, so the policy holder must consider the benefit of a particular rider against the additional expense, as many riders are designed to provide benefits for a specific situation that may not.
It is a good decision that some riders should be added at the start of the policy. Or can be added at any time during the course of the policy, if you have an agent or broker of life insurance, helps you in sorting out the riders available to you and that will determine which makes the most sense for you.
Other common riders for life insurance include: long-term care, typically available with cash-value policy types, to access a death benefit to use for specific long-term care needs; Term conversion, to convert a term policy into a permanent policy under the same terms; Waiver of premium, which covers premiums when the policyholder becomes ill or disabled; and Guaranteed Insurability, Which allows adding to the death benefit even without giving information about the medical exam.
Some general insurance policy riders allow or recommend that general life insurance riders include child protection, spouse protection, property protection, and default or surcharge protection in addition to general insurance riders.
Cheapest Life Insurance Companies in USA
Cheapest life insurance means more coverage at a lower monthly rate. Assume that at least 1 million coverage is available at a monthly rate of 20 years. A 35-year-old woman who is a non-smoker and gets coverage of at least 1 million at a simple monthly rate after 20 years in exchange for an average health insurance, it is called the cheapest life insurance.
There are some cheapest life insurance providers in the US, whose links can be opened to get more information-
1. Banner Life - rating 4.1 out of 5, monthly rate is $ 46.63, grade is A+
2. Pacific Life - rating 4.0 out of 5, monthly rate is $ 46.72, grade is A+
How to Choose a Life Insurance Company?
However, price is not the primary consideration in choosing a life insurance company and policy. It is very important to know what you get in return for your money. When you compare the same type of insurance quotes from different companies, it is very surprising to know why there is so much difference between the same type of insurance.
This is because the policies of all the insurance companies are different. For the same type of insurance, the policies of two different companies are never the same. All the insurance companies use their own algorithm and not all coverage is same. Before buying life insurance, it is important to know whether the insurance company is reliable or not? What is your monthly rate? Will the premium increase after buying the insurance? How and how much coverage will I get? What will be the time period? Is all this written proof by the insurance company or not?
Buy life insurance from any insurance company after getting all the information about what is the rating of the life insurance company and how much is its premium and what is the reaction of the common people. If you want to take the type of insurance as per your requirement, if a big insurance company does not have that type of insurance, then do not get influenced by the banner or rating of that company. Buy life insurance only after taking full information after thinking carefully in every way.
Buy your life insurance policy
You can buy your life insurance in two ways. 1. Online, 2. Through Agents and Brokers. Online Insurance purchase means you buy directly from a company, and if you buy through agents or brokers, the agent or broker works with many other companies, so they can give you a good amount of advice as well.
Through Agents and Brokers. Using a broker or agent is more beneficial because they can help you find the best policy and company for your situation, rather than just submitting a quote from one company. The process of buying life insurance from an online broker will vary slightly depending on the broker you use. Some general procedures are followed as follows:
1. Enter your date of birth, gender and zip code to receive a generic quote for the type of policy you want. Term policy and death coverage benefit can adjusted and see how it affects the quote.
2. Answer a few questions about your height, weight, and family history. You can then use the new information to find satisfactory information for more specific quotes from several companies for the type of policy you want. You can adjust the term and death benefits here as well as see how quotes are affected.
3. On the basis of the policy and quotes, you have to choose an insurance company.
4. Fill out an online application form with questions about current residential address, personal contact information, marital status, male/female, driving violations, plans for international travel, military membership, health status, and other things that affect the premium. You will take very less time to fill this application but it will be beneficial for you.
5. As per the information provided by you the online broker uses all that information and finds out the more accurate quote for you, and recommends you to switch to another company for a better price.
6. If you wish to proceed with the broker's suggestions, the broker/agent will call the chosen insurance company, who will verify all your information. If all is correct, they may ask more questions about your health history and may collect beneficiary information about you.
7. Nearly 30% of life insurance applicants now access final policy documents electronically. Can sign and receive an offer of insurance within a day or so based only on the information gathered up to this point.
8. Based on the medical history of applicant, about 75% of applicants must first undergo a physical exam before an insurance company can underwrite a policy, unless you are buying a no-exam policy. In addition, the insurance company may request medical records. The exam is conducted at your home, your office, or the office of a medical professional. Your height, weight and blood pressure will be measured, and blood and urine samples will be collected and sent to a laboratory for analysis for cholesterol levels, the presence of medications, and other health indicators. The insurance company will use all the information provided, along with other information collected during the application process, to select the appropriate risk category or table rating for your policy.
Life insurance experts suggest storing policy documents in at least two places to help keep them safe and ensure that your beneficiaries can find them and file a claim if something happens to you. For each individual life insurance policy, you must record:
•Full name and address of the life insurance company that issued the policy.
•If the insurance company belongs to a group of companies, the name of the group and its U.S. Headquarter Location.
•Also mention the policy type, contact number, date of issuance, and amount of death benefit.
•If insurance through any broker then mention the name and address of your agent or broker.
•Also mention where you have keep the original policy of insurance.
Best Life Insurance Companies of US
To help you find the best life insurance company for you, we researched what life insurance matters to consumers, experts, and professional reviewers. According to an unbiased survey, the list of some of the best insurance companies has been prepared according to which life insurance companies have been preferred or searched most frequently by experts and professional reviewers.
Life insurance companies in the US, ranked below and rated according to their best, are listed below:
1. Northwestern Mutual - Rating 4.6 out of 5 - Grade- A++
2. Haven Life - Rating 4.3 out of 5 - Grade- A++
3. State farm - Rating 4.2 out of 5 - Grade- A++
4. Banner Life Insurance - Rating 4.1 out of 5 - Grade- A+
5. Principal Mutual fund - Rating 4.0 out of 5 - Grade- A+
6. Pacific Life - Rating 4.0 out of 5 - Grade- A+
7. Guardian Life - Rating 3.9 out of 5 - Grade- A++
8. Nationwide - Rating 3.9 out of 5 - Grade- A+
9. Primerica - Rating 3.9 out of 5 - Grade- A+
10. MassMutual - Rating 3.9 out of 5 - Grade- A++
11. New York Life - Rating 3.8 out of 5 - Grade- A++
12. Allstate - Rating 3.8 out of 5 - Grade- A+
13. John Hancock - Rating 3.7 out of 5 - Grade- A+
14. Protective - Rating 3.7 out of 5 - Grade- A+
15. Mutual of Omaha - Rating 3.6 out of 5 - Grade- A+
16. Prudential - Rating 3.6 out of 5 - Grade- A+
General Insurance
Apart from life insurance, there are also insurances which I have mentioned above. We get insurance for home, business, mobile, farming, fish farming, crop etc. This is kept in the category of general insurance. I will discuss about some general insurance below-
1. Home Insurance - If you get your home insured, then if there is any kind of damage within the insurance period of time, then its coverage will be completed by the insurance company. The tenure of home insurance depends on the policy taken by you, it may be for 1-5-10-20 years or life time.
Home insurance covers loss due to any kind of loss like natural calamity, fire, earthquake, lightning, flood etc. The home insurance policy also covers some other untoward incidents like theft in the house, damage caused to the house due to fire, fighting-riots etc.
2. Vehicle Insurance - In most countries, it is very necessary to insure the vehicle according to the law. Driving a vehicle on the road without vehicle insurance is considered a legal offense.
If your vehicle is insured, then according to the rules of the insurance policy, the insurance company has to cover any kind of loss. If the insured vehicle is stolen or there is an accident, then a lot of assistance is available due to the vehicle insurance policy.
The benefit of a vehicle insurance policy is understandable when a person gets into an accident with the vehicle or someone dies due to the accident. In such a situation, it is covered under third party insurance. If you also have any type of vehicle then it must be insured.
3. Travel Insurance - In Travel Insurance the insurance company compensates for any kind of loss caused in the journey. If you have taken travel insurance, then the travel insurance policy is valid from the beginning of your journey till the end of the journey.
If you are traveling within country or another country, in case of injury or loss of luggage while traveling, the insurance company will compensate the same.
4. Crop Insurance - Mostly farmers insure their crops and it is more important for those farmers who take advantage of agricultural loans. When the crop is insured, the insurance company gives compensation to the farmer in case of any kind of damage to the crop. In case of crop failure due to flood, due to fire or due to any disease, compensation is given by the insurance company.
5. Business Liability Insurance - Liability insurance is actually for the customer, if a customer is cheated by a company or a business, then it is to compensate for the loss caused to the customer. If a customer on a company or business claims his loss or being cheated, then the liability insurance company has to bear the entire cost of the penalty and legal proceedings on the company.
Last Word
My dear friends, I have tried my best for you to provide complete information related to life insurance. If you also like this article and forwarding it to your friends the I will understand that my article "Life Insurance and Policies" is insured, and I will also understand that my effort was successful.
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