Life Insurance Made Easy

Life Insurance Coverage In Texas

Life Insurance can be the cornerstone of sound financial planning as you and/or your beneficiaries can use it to replace income, pay final expenses, create an inheritance and pay “Death” Taxes for Federal and State “Estate” settlements. You can also create a source of savings over time with Whole Life or Permanent Insurance.

A life insurance policy is just that. It’s a contract between you and the insurance company on your life. You pay a premium for a certain amount of ‘death benefits’ (lets say $1 Million dollars for example) that will be returned to your ‘beneficiaries’ (those whom you choose to receive your benefits upon your death) for insurance coverage you place on your life.

Using the example above as insurance coverage on your life ($1 Million dollars) depending on your age, health and other factors at the time you apply for a said life insurance policy will determine how much premium you will be charged by the insurer for coverage on your life. Upon your death (if it is within the specified time limits of the policy), a death benefit will be paid out by the insurance company for the said $1 Million dollars of coverage you placed on your life to your beneficiaries.

Special Note: Be advised that most all life insurance policies have restrictive language or ‘exclusions’ of coverage for death benefits under certain circumstances. Insurers will also only pay death benefits if Premiums are current and the policy is still in force. Review these and other important factors with your life insurance agent before purchasing any particular policy.

Types of Life Insurance Policies

There are essentially two types of Life Insurance:

Term Life Insurance or Term Insurance is the simplest form of life insurance. It pays only if Death occurs during the term of the policy, which is usually from 1 to 30 years.

Whole Life or Permanent Insurance pays death benefits when the policyholder dies during the term of the policy and the policy has not ‘Matured’. (Maturity of the policy may occur at an obtained age of 120 years.)

You should consider Term Life or Term Insurance if:

1. You need life insurance for a specific period of time. Term Life Insurance enables you to match the length of the term policy to the length of the need. For example, if you have young children and want to ensure that there will be funds to pay for their college education, you might buy 20-year term life insurance for yourself and your spouse.

2. You want the insurance to repay a debt that will be paid off in a specified time period, buy a Term Life Insurance policy for that period.

3. You need a large amount of life insurance, but have a limited budget. In general, this type of insurance pays only if you die during the term of the policy, so the rate per thousand of death benefit is lower than for Whole Life or Permanent Life Insurance. If you are still alive at the end of the “Term”, coverage stops.

A new policy can be written, but as noted before certain factors will affect the new Premium and it will generally be higher for the term. Unlike Whole Life or Permanent Insurance, you will not build equity in the form of cash savings.

If you think your financial needs may change, you may also want to look into what are called ‘Convertible Term’ Life Insurance policies. These allow you to convert to Permanent Life Insurance without a medical examination in exchange for higher premiums.

Keep in mind that Premiums are at their lowest to obtain when you are young and increase if you need insurance as you age. Some Term Life Insurance policies can be rewritten with out ‘Medicals’ when the policy ends, but the premium will generally increase.

You should consider Whole Life or Permanent Insurance if:

You want life insurance coverage for your lifetime. A permanent policy pays a death benefit whether you die tomorrow or live to be 120. Remember, some restrictions can apply.

You want to accumulate a savings element that will grow on a tax-deferred basis and could be an available source of borrowed funds for a variety of purposes. The savings element can be used to pay premiums to keep the life insurance in force if you can’t pay them otherwise, or it can be used for any other purpose you choose. You can borrow a percentage of these funds even if your credit is shaky. The death benefit is collateral for the loan, and if you die before it’s repaid, the insurance company collects what is due the company before determining what goes to your policy beneficiary.

Special Note: Whole Life or Permanent Insurance policies pay ‘death benefits’ when the policyholder dies during the term of the policy. Remember at ‘Maturity’ (that may occur at age 120) the policy ends. So if you live longer than lets say 120 you would only receive back the ‘cash value’ of your particular policy (the portion of your insurance premium paid into the policy that is considered cash value by the insurance company), not the death benefit portion from that particular insurance policy for example.

There are circumstances where you may be able to cancel your policy and receive back any monies considered cash value that the policy may have accumulated. You should review these important factors with your life insurance professional before your purchase your policy.

Keep in mind that Premiums for Whole Life Insurance or Permanent Insurance can be higher than for Term Life Insurance. However, the Premium in a Permanent Life Insurance policy remains constant no matter how old you get during the length of the policy, while Term Life Insurance can go up substantially every time you reach its term limit and you have to write the policy over again for a new term.

Special Note: There are a number of different types of Whole Life or Permanent Insurance policies, such as what most people know commonly as Whole (Ordinary) Life Insurance, Universal Life Insurance, Variable Life Insurance, and Variable/Universal Life Insurance.

Consult a Life Insurance Agent for this important health insurance coverage. Thinking about securing the well being of your family’s financial future is always an important event.

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