Life insurance is an agreement between you and the insurer to pay your beneficiary a sum upon your death. Life Insurance Companies Las Vegas may offer benefits during your lifetime, like cash value.
Generally, you must have a good reason to purchase life insurance. The most common reason is to help your family maintain their standard of living if you die unexpectedly.
A life insurance policy offers a lump sum payment, known as the death benefit, to your beneficiaries in the event of your death. This payment is typically tax-free. Many policies also have a savings element or cash value that accrues over time, though this is not a feature of all life insurance plans. The death benefit is determined at the time of purchase, and it can be based on factors such as age, health, and occupation. Some policies may cover only certain causes of death, such as natural or accidental. Others may include specific exclusions, such as suicide or homicide.
Term insurance offers protection for a specified period, such as 10, 20, or 30 years. At the end of this period, you will no longer be covered. Whole life and universal life insurance provide coverage for your entire lifetime, with some offering a chance to build up cash value. These policies are more expensive than term life insurance, but they offer the security of permanent coverage.
Some life insurance policies allow you to borrow against the cash value of your policy. If you die before the debt is paid, your death benefit will be reduced. This is a common way to use life insurance, especially for those with a short-term goal such as paying off a mortgage.
Other policies may pay out a portion of the death benefit while you are still alive, such as in the event of a critical or terminal illness. These policies are sometimes called living benefits or accelerated death benefits. Most of these policies are “qualifying” life insurance, meaning that the proceeds are free from income and capital gains taxes.
Group life insurance covers a group of people, such as employees of a company or members of a pension or superannuation fund. This type of insurance is often less expensive than individual life insurance because the insurer takes into account the overall health and family history of the group instead of evaluating each person individually.
Generally, life insurance pays out a fixed amount, called a death benefit, to beneficiaries in exchange for a premium paid by the policyholder. This money, usually tax-free, can help pay off a mortgage, fund college tuition or cover funeral costs.
The type of life insurance coverage you choose also affects the amount you’ll pay in premiums. For example, term policies typically cost less because they provide coverage for a specific period of time, such as a 10- or 20-year term. Permanent policies, which last a lifetime and include a cash value component, cost more, as does adding riders to the policy.
When evaluating your options, consider the needs of your family and your budget. The longer the term or higher the death benefit, the more expensive your premium will be.
Another factor that impacts the price is your health status. Most life insurance providers require a medical exam to ensure that you don’t have a preexisting condition that could drastically shorten your life expectancy. The results of this exam are used to determine your rating classification and will impact the rate you pay.
Insurance companies use the premiums they collect to cover their daily expenses and pay claims for other policyholders who die. They also invest the remaining income to generate profit.
As a result, life insurers are not required to offer policies to everyone who applies. In fact, many companies will decline applicants or increase their premiums to make sure they’ll have enough funds to pay out a claim.
Individual life insurance companies have their own evaluation process, known as underwriting, and weigh factors differently. This is why it’s important to shop around for the best rates.
You can find quotes from a variety of providers through online resources or your local agent. In addition, many brokers specialize in connecting people with life, auto and home insurance policies. Because they work with multiple insurers, they can often get you the best quote from each company. However, be aware that some brokers are paid a commission by the insurer to sell you their product.
Life insurance riders are add-ons that modify a policy’s coverage. Some offer additional protection if you meet certain conditions, while others make it easier to change or transfer your policy. Riders often cost more than the basic premium. They can vary by insurer, product and state. They are commonly found in whole life insurance policies. Some of the more popular riders include guaranteed insurability, family income benefit, accelerated death benefit and paid-up additions.
These add-ons can help you build a stronger life insurance foundation, but they can also be expensive. The best way to determine whether a rider is right for you is to talk with an experienced life insurance expert. They’ll be able to walk you through the different riders available and recommend which ones might be appropriate for your unique needs and circumstances.
For example, a return of premium rider is a great option to consider if you want to ensure that you’ll get back the money that you’ve paid on your life insurance policy over the years (tax free). Alternatively, a paid-up additions rider will let you increase the cash value and death benefit of your life insurance policy by adding a lump sum to it at certain times throughout your life.
Other riders that are available include accidental death and dismemberment coverage, which doubles the payout of a policy in the event of a covered accident, and disability waiver of premium, which allows you to skip paying your life insurance premiums while you’re unable to work. Similarly, a spousal or two-party rider will pay out if the policyholder’s spouse dies and may allow for a quicker transfer of the policy to the other party.
Other riders are available for whole life insurance policies that allow you to change the policy’s face amount, premiums and/or beneficiaries without having to undergo a medical exam. Other options, like a cost of living rider, gradually increases the coverage of your policy to match inflation and consumer price index growth, but at a higher expense.
Beneficiaries are the people or entities that receive the death benefit from a life insurance policy. They can be almost anyone you choose, including a trust or charity. You can also assign multiple beneficiaries and set a percentage of the death benefit that each should receive. It is important to keep your beneficiaries updated as your circumstances change, like a divorce or the birth of children. Failure to do so could mean that the wrong person or entity will receive your assets or policy proceeds.
A beneficiary can choose to take the entire death benefit at once in a lump sum or to receive payments over time, typically monthly. This option can be helpful if the beneficiary has ongoing financial needs, such as a child with special needs or a recurring medical bill. You can also choose to leave the proceeds in a trust, which will hold and distribute them according to conditions that you set.
If a beneficiary is receiving government assistance, such as food stamps or Medicaid, you should ensure that receipt of the life insurance payout will not disqualify them from further benefits. You may want to consider naming a contingent beneficiary, or secondary beneficiary, to avoid this issue.
It is common to designate a spouse as the primary beneficiary, but you can also choose to allocate a portion of your death benefit to other family members or friends. This can be a good way to help support children from previous marriages, for example.
Some policies require that you identify a beneficiary by full legal name, as well as relationship to you (spouse, child, parent). This is important because it helps the insurance company verify the information and locate your beneficiaries if needed. It is also a good idea to give your beneficiaries your contact information, so they can reach you if necessary.
While most life insurance policies allow you to change your beneficiaries at any time, it is a good idea to do so periodically to ensure that your needs and the financial situation of your beneficiaries have not changed. A good practice is to review your beneficiaries and their current information at least once a year.