Life Insurance is a necessary tool towards secure financial planning. However, there’s a lot of misinformation circulating around which compromise on the truth of just how beneficial an insurance policy is. To help you save both time and money, PolicyStreet.com has compiled commonly asked questions on anything related to Life Insurance.
We aim to be objective so as to give you the unbiased advice that you truly deserve!
1) What exactly is life insurance?
Simply put, a Life insurance policy is a contract between you and an insurance company. Essentially, in exchange for your premium payments, the insurance company will pay a lump sum known as a death benefit to your beneficiaries after your death. Your beneficiaries can use the money for whatever purpose they choose.
2) Why is it so important?
Life insurance is important as it protects your family and lets you leave them a non-taxable amount at the time of death. It leaves your grieving family or loved ones with something to get by after surviving you and it is also used to cover your mortgage and your personal loans, such as your car loan. Your individual life insurance follows you when you retire and you are no longer insured by your employer. This insurance will also replace your family income when resources are less so they can maintain their quality of life.
But wait, there are plenty of more hidden gems you discover by getting yourself a comprehensive life Insurance!
3) Can the benefits be availed only after one’s death?
Not necessarily! If you’ve had your policy in force for a few years and it has gained some cash value over the years, you will be eligible to cancel the policy and take the surrender value and gain a cash payout! Surrendering implies giving up the insurance policy and, in return, you’ll receive the cash value minus any fees. When you cancel your policy, your heirs will receive nothing from the policy when you die.
However, please make sure you calculate all risks and costs before deciding to surrender because this can also mean that you do not leave anything behind for your loved ones. Alternatively, you can consider withdrawals or loans in order to keep your cash flow as well as life Insurance both intact.
4) What is term Insurance? How is it different from life Insurance?
| Basis | Life Insurance | Term Insurance |
|---|---|---|
| Offered Coverage | Provides both death and maturity benefit. | Only provides benefits in the event of demise occurring only within the term period. |
| Flexibility | In life insurance policies, the maturity benefit is provided only if the insured completes the entire tenure of the policy. | More flexible in terms of surrendering. In term Insurance, if you stop paying the premium, your policy is automatically terminated and lapse. |
| Claims | Simple, hassle-free claims through policystreet.com! | Simple, hassle-free claims through policystreet.com! |
5) What happens if I withdraw early?
Generally, you can withdraw a limited amount of cash from your whole life insurance policy. In fact, a cash-value withdrawal up to your policy basis, which is the amount of premiums you’ve paid into the policy, is typically non-taxable. Any withdrawals that exceed your basis, meaning you’re dipping into gains, will be taxed at your ordinary income rate. Your death benefit will be reduced based on the amount you withdraw.
6) What do I need to know before buying a life insurance policy?
While the list of things to consider can vary from individual to individual, here are some of the things that we suggest you to look into before buying a policy:
a) Decide how long you need coverage.
Life insurance is designed to either last a certain period of time (called term life) or a lifetime (including whole life and universal life). If you only need insurance for a specific period of time then consider the term. If, however, you need life insurance for as long as you live (for things like burial expenses or income replacement for a spouse), consider permanent coverage. Find out more about life vs term Insurance here.
b) Calculate how much life insurance you need.
This cost is completely subjective and depends on your financial planning. If you have enough savings for your family to get by should you pass away, you can consider getting cheaper insurance. However, if you believe you will have considerable financial ramifications after your death, such as debts or if your family needs an income replacement, go for a costlier insurance plan.
c) Think about other objectives.
Some permanent life insurance policies can be used as savings. Permanent life insurance policies are lifelong and have cash value that’s meant to increase over time. These permanent policies contain a death benefit (or face amount), which is the amount paid at the time of death, and a cash value that grows over time on a tax-deferred basis, similar to retirement or tuition savings plans. It’s good to know the ways you can use life insurance in your financial portfolio.
d) Talk with a trusted advisor.
When you’re ready to purchase life insurance, you need someone who can provide you help through the process. Please do not hesitate to reach out to policystreet.com’s super helpful customer assistance team for the most unbiased advice!
For more information, click on this link to get insights into everything you need to know before purchasing life insurance!
7) When should I purchase life insurance?
Technically, as long as you’re a legal adult, there is no age bar to purchasing a life Insurance. However, we recommend you to purchase it as early as possible because the younger you are, the cheaper your premiums will be! This is primarily because young people are considered to have lesser health complications as opposed to those who are aged.
8) Who can I designate as beneficiary?
Your life insurance beneficiary is the person or entity who will receive the proceeds of your life insurance policy. The person who you name as a beneficiary is entirely up to you, it doesn’t necessarily just have to be your spouse or children. However, when choosing a beneficiary, avoid naming a minor child (children may not be able to receive funds) or your estate (it could have tax implications).
9) Can I purchase life insurance even if i have serious health conditions?
Absolutely! However, being chronically ill can make you an at-risk individual, which can put your premiums at a higher charge than a healthy individual. Please be sure to be honest with your insurance agent about all the afflictions that you suffer from. Otherwise if you suffer from serious health conditions and pose yourself as healthy, you can risk being tried for insurance fraud!
10) Where can I get the best Life Insurance from?
We’re glad you asked! www.policystreet.com is a one stop platform that is designed to take care of all your Insurance related needs! Check how you can get Life Insured in the cheapest and most comprehensive way possible!
Remember, this was just a compilation of common questions, should you have any questions of your own, don’t hesitate to ask our super helpful customer assistance team! They’re only a call/text away, anytime, anyday!
