March 23, 2019

Affordable Life Insurance In Florida

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What Is Life Insurance?

Life insurance rates are worth their weight in gold should you ever need to make a claim. Life insurance is a simple and inexpensive form of insurance coverage that pays out a lump sum (the sum assured as specified in your life insurance policy) in the event of the death of the policyholder.

Life insurance is similar to any other type of insurance policy. It is a contractual agreement between the life insurance company and the insured person. The insured person agrees to pay the term life insurance rates and the insurer in return pays out for any loss as specified in the life insurance policy. The life insurance payout is tax free.

Life insurance protects you from financial loss in the event of the death of the policy holder. It is protection for your loved ones or those left behind. The life insurance payout ensures that you don’t leave you debt or bills to those left behind. Term insurance rates are charged on either a single or joint life basis. Depending on the life insurance plan, some policies pay out on the diagnosis of a terminal illness during the term of the life insurance policy.

There are two major types of life insurance—term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including

  • traditional whole life,
  • universal life,
  • variable life and
  • variable universal life.

In 2016, about 4.3 million individual life insurance policies bought were term and about 6.4 million were whole life, according to the American Council of Life Insurers.

Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.

Provide financial security for your family

If you’re married, have kids or are supporting elderly relatives, a life insurance policy helps ensure the financial support you provide now will continue after you die. Among other benefits, the right policy can:

  • Replace your monthly income to help with daily living expenses.
  • Cover medical bills.
  • Pay off debts like a home mortgage, credit cards and other loans.
  • Pay your funeral expenses.
  • Help pay estate taxes and assist with other estate-related matters.
  • Help with your kids’ college tuition.
  • Provide assistance with family business continuation plans.

Another important benefit of life insurance is that the payments are made directly to your beneficiaries, rather than going through your estate. That means your loved ones could get the money they need faster – usually without any income tax liability.

Term Life

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 one to 30 years. Most term policies have no other benefit provisions.

There are two basic types of term life insurance policies: level term and decreasing term.

  • Level term means that the death benefit stays the same throughout the duration of the policy.
  • Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy’s term.

In 2003, virtually all (97 percent) of the term life insurance bought was level term.

Term insurance is generally cheaper because the coverage is only provided for a specific period of time. In most cases, the insurance company will never pay out because you will outlive the term and the policy will expire. However, term life premiums can and do rise with age, whereas whole life premiums stay steady. Late in life, they can become cost-prohibitive.

Term life insurance rates can vary as much as 50% for the same coverage. You can request a quote from life insurance providers online.

Whole life/permanent

Whole life or permanent insurance pays a death benefit whenever you die—even if you live to 100! There are three major types of whole life or permanent life insurance—

  • traditional whole life,
  • universal life,
  • variable universal life,
  • and there are variations within each type.

In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So the company keeps the premium level by charging a premium that, in the early years, is higher than what’s needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.

By law, when these “overpayments” reach a certain amount, they must be available to the policyholder as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.

In the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life product—universal life insurance and variable universal life insurance.

What impacts your life insurance rates?

Once you choose the type of insurance you want, your actual insurance cost is based on many factors, with age and health being the biggest factors. For either term or whole life, the following factors can impact how much you pay:

  • Overall health
  • Smoker/non-smoker
  • Family history
  • Age
  • Gender
  • Lifestyle (high-risk activities)
  • Career
  • Location

Will Your Life Insurance Payout Be Taxed

Generally speaking, when the beneficiary of a life insurance policy receives the death benefit, this money is not counted as taxable income, and the beneficiary does not have to pay taxes on it. However, a few situations exist in which the beneficiary is taxed on some or all of a policy’s proceeds. If the policyholder elects not to have the benefit paid out immediately upon his death but instead held by the insurance company for a given period of time, the beneficiary may have to pay taxes on the interest generated during that period. When a death benefit is paid to an estate, the person or persons inheriting the estate may have to pay estate taxes on it.

Income earned in the form of interest is almost always taxable at some point. Life insurance is no exception. This means when a beneficiary receives life insurance proceeds after a period of interest accumulation rather than immediately upon the policyholder’s death, he must pay taxes, not on the entire benefit, but on the interest.

In some cases, life insurance proceeds are paid to the estate of the deceased. This often happens when the policy’s beneficiary precedes the policyholder in death and no contingent beneficiary is named. The death benefit adds to the value of the estate, which may be subject to estate taxes or inheritance taxes. The easiest way to avoid this situation is to name a primary and contingent beneficiary to a life insurance policy.

How Does Term Life Insurance Work
How to Buy Life Insurance Direct or Broker

Choosing Life Insurance For Yourself
Choosing the Best Life Insurance Option for You
What Is Term Life Insurance And Who Should Use It

Peter

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