Tag Archives: Basics

Life Insurance Basics: Getting Started

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Let’s be honest. The topic of life insurance isn’t exciting or glamorous, but it is important. In fact, many experts consider life insurance to be the cornerstone of good financial planning.

But how do you know if you need life insurance? How much is enough? What kind of life insurance policy is best for you?

Answering these basic questions about life insurance will help to simplify the shopping process and ultimately allow you to select the best policy to secure your family’s future for years to come.

Establishing Your Needs

To clear up any misconceptions, life insurance is designed to protect your loved ones from financial loss in the event of your death. Knowing this, it’s important to establish whether you need life insurance and how much you should purchase.

According to MetLife you generally need life insurance if:

You have a spouse
You have dependent children
Relatives or elderly parents depend on your income
Your retirement funds are not enough to provide for your spouse’s future
You own a business
You have a large estate

The beneficiaries of your life insurance policy can use the proceeds from your life insurance to:

Pay for last expenses and funeral costs
Cover estate taxes (if applicable)
Pay off existing debts (mortgage, car loan, credit card debt)
Pay for everyday expenses (food, clothing, childcare)
Put towards your spouse’s retirement fund
Donate to charity

If you don’t have dependents, you may still wish to purchase a life insurance policy to avoid becoming a financial burden to your loved ones in the untimely event of your death. Young singles also benefit from purchasing life insurance while they’re young and healthy, allowing them to secure a low premium for years to come.

Choosing a Dollar Amount

Figuring out how much life insurance your loved ones would need to maintain their quality of living can be tough. Generally speaking, experts recommend purchasing between 5 and 10 times your annual salary. But, as MetLife points out, your exact need for life insurance will depend on your personal and financial circumstances.

You can get a ballpark estimate of your life insurance needs by first totaling the funds your family would need for the abovementioned items (funeral costs, daily living, etc.). You can find helpful worksheets online that will help you organize and come up with this list of expenses.

After you’ve totaled your expenses, take stock of the funds you have in cash, savings, retirement accounts, bonds, property, pension and Social Security. Subtracting your financial resources from your expenses will give you a rough idea of how much life insurance you should purchase.

When it comes to choosing how much life insurance to purchase, it’s a good idea to get an idea of your needs before buying a policy–but your licensed life insurance professional will undoubtedly help you choose a dollar amount that accurately reflects the needs of your beneficiaries.

Selecting a Policy

Generally speaking, there are two types of life insurance: term life insurance and permanent life insurance. The type of policy you select will depend largely on your life insurance needs and what resources you have to pay life insurance premiums.

Term Life Insurance

Term life insurance, as the name suggests, will cover you for a specified amount of time, which means the insurer will only pay out a death benefit if you die during the term of your policy.

According to the Insurance Information Institute (I.I.I.), most people purchase a 20-year term policy, although smaller terms are available. Of course, you can renew your term life policy after it expires, although your premiums may increase as you age. But all in all, because of the “temporary” nature of term life insurance, policies are generally much cheaper and are therefore an attractive option for young people and families with a limited income.

Permanent Life Insurance

On the other hand, permanent life insurance, as you might have guessed, is permanent. A permanent life policy will pay out a death benefit whether you die tomorrow or in 60 years.

Permanent life insurance is also an appealing option for many because of the added benefit of the policy growing on a tax-deferred basis, which can grow to be fairly large over time. As a policyholder, you may be able to borrow against this cash value while alive, which has been of great help to some. Of course, most loans need to be paid back otherwise they will be subtracted from the death benefit, and your beneficiaries may have to liquidate assets to pay back the loan.

Nonetheless, permanent life insurance offers a wide variety of saving and investment options. Because of this, policies are generally more expensive than term policies, which may be hard for young adults to handle.

Your life insurance professional will help you decide which type of policy is best for your life insurance needs–and your budget. But researching these policy types beforehand can help you narrow down which policies appeal to you.

Knowledge is Power

No, learning about life insurance and planning for the unexpected isn’t glamorous, but it is important. So take advantage of consumer resources and talk to a life insurance professional about purchasing affordable life insurance. You’ll rest easier at night knowing your loved ones are taken care of for years to come!

About this Author

About InsureMe

Megan L. Mahan is a copywriter and insurance information expert with InsureMe in Englewood, Colorado. InsureMe links agents nationwide with consumers shopping for insurance. Specializing in auto, home, health, long-term care and life insurance quotes, the InsureMe network provides thousands of agents with insurance leads every year. For more information, visit InsureMe.com.

The Basics of Term Life Insurance

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Should you “buy term and invest the rest” or fuel your life insurance with “the power of cash value”?

Term life insurance is often touted for its “pure insurance protection,” which includes none of the cash value features inherent in whole life policies. Term life insurance covers you for a specific period of time – usually 10, 15, 20 or 30 years. You can also buy term insurance that covers you until you reach a certain age, usually 65 or 70. Term insurance policies expire at a set time and if you don’t die within the term there is no pay-out of the policy. If you do die within the term, your beneficiaries receive the money tax-free.

Generally, you purchase term life insurance to protect your loved ones from debts or provide for short-term obligations. For example, if you and your spouse own a home and you were to die tomorrow, your spouse would have to pay the mortgage on his or her own. If you had a term life insurance policy, your spouse could receive enough money from the policy’s death benefit to pay off the mortgage.

Term insurance doesn’t just cover specific debts, however. If you have children, term insurance can protect your family’s finances, providing money for college and living expenses if you die before your children are fully grown.

Medical exam is usually required

When you apply for term life insurance coverage, the insurance company will probably require a medical exam before issuing a policy. The examination is basic, covering your height, weight, medical history and blood and urine testing. With the blood and urine tests, the insurer looks for specific medical problems. Positive results could affect your premium, or even your ability to buy a policy.

Smokers will pay more for life insurance, although cigar smokers might get less expensive premiums than those using cigarettes. If you smoke marijuana, but not cigarettes, you still must admit to being a smoker on the policy application. Insurers don’t generally differentiate between different types of smoke inhalation. (Marijuana users must also disclose their drug use.)

Different flavors of term

As you age, the likelihood you will die sooner increases. That’s why older individuals pay more for life insurance. However, affordable term life insurance is possible if you shop around. If you are looking for low cost term life insurance, you can lock in low premiums by buying for a “level term” policy. That means for a specific time period, say 20 years, your premium rate stays the same. Many term policies give you the option to renew your coverage at the end of the term without undergoing another medical exam, although your premiums will rise for the next term – often substantially.

A less popular policy is “annual renewable term.” This gives you coverage for one year with the option of renewing it each year for a specified duration, such as 20 years. With this policy, your term life insurance rates will go up every year you renew and are calculated based on the probability of your dying within the next year.

If you’d like to have term life insurance in place to provide for beneficiaries yet you are confident you’ll outlive the policy, you could consider “return of premium” term life insurance. Under this type of policy, if no death benefit has been paid by the end of your insurance term, you receive all your premiums back. It pays to shop around for a policy like this, but on the low end you can expect to pay 50 percent more in premiums than comparable traditional term life insurance.

If you have trouble finding life insurance because of illness or a troubled medical history, you can turn to guaranteed issue life insurance coverage [http://www.insure.com/quotesmith/controller?REF=99998&reqid=qstermindex&redirx=x], sometimes called “quick issue” or “simplified issue” insurance. Guaranteed issue policies require no medical exam, but you pay a higher premium in exchange for the guaranteed coverage. That’s because the insurance company takes on more risk in insuring people without knowing their medical condition. Guaranteed issue policies can require waiting periods before coverage kicks in. They might be the only option for some people. A life insurance broker can search the marketplace for a guaranteed issue policy that meets your needs.

How long a term?

Figuring out which term you should buy – 10 years, 20 years, 30 years or some other number – requires a major review of your debts, financial needs, dependents’ needs – and when all those might change. Jack Dolan of the American Council of Life Insurers suggests you ask yourself, “When will my dependents reach financial independence?” Also look at major debts, such as mortgages or other loans, and when those are due to be paid off.

Guenther Ruch of the Wisconsin Insurance Commissioner’s office says it’s a good idea to review your life insurance needs carefully, both when you buy the policy and on a regular basis throughout your life. “You may not have the coverage you need. You may have more than you need,” Ruch says.

Ruch has the following recommendations for anyone buying life insurance, or anyone who already has coverage:

Schedule a routine “check-up” with your insurance providers at least once a year.
Shop around when you’re in the market for a new policy. Term life insurance rates vary considerably among insurers.
Remember, an insurance policy is a legal document. Read it carefully and make sure you understand it.

“Perhaps you want to leave assets for your heirs, or for charity, or you need the death benefit for business-planning purposes. These are all areas where life insurance can play a role, but it’s really designed for financial protection,” Dolan says.

Term vs. whole life insurance: The cash value debate

Variable universal life insurance (VUL), a form of permanent life insurance, is popular because it offers a cash value that may build up with interest over time. The interest earned is based on the performance of the stocks, bonds, or other investment portfolios in which you choose to invest your premiums.

Some financial planners advocate VUL policies because they force you to save money in the cash value component. Others recommend you buy term insurance for the cheaper premium, and then invest the money left over in mutual funds or other investments. VUL also allows you to change your death benefit and subsequent premium payments over time.

Cash value in life insurance should not be considered a traditional investment because any partial withdrawals or loans will reduce your death benefit. Also, if you withdraw your cash value in an amount exceeding the premiums you have paid into the policy, you will face a tax bill. In addition, every year you own the policy, more of your premium goes to pay for the cost of insuring you and less goes toward the cash value.

About this Author

Amy Danise is a staff writer for Insure.com. Visit Insure.com for a comprehensive array of comparative auto, life and health quotes, including a vast library of originally authored insurance articles and decision-making tools that are not available from any other single source. Insure.com is dedicated to providing impartial insurance information to consumers. Visitors can obtain instant quotes from more than 200 leading insurers, achieve maximum savings and have the freedom to buy from any company shown.

Pennsylvania Car Insurance Shopper’s Guide – PA Auto Insurance Basics

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How does one find the best Pennsylvania car insurance? What are some of the cheapest auto insurance companies in Pennsylvania? What are the PA minimum auto insurance coverage requirements? What are some things to look for when comparing Pennsylvania car insurance rates? How does one find Pennsylvania rental car insurance – and should it even be purchased in the first place? These are all key questions for PA residents that are of legal driving age. Read on to learn some of the PA auto insurance basics and see if maybe you can end up saving yourself some money in the process!

Pennsylvania No Fault Auto Insurance Laws

The state of Pennsylvania uses a no-fault system in regards to car accidents. This means that your insurance company will pay your injury claim regardless of who was at fault in the event of an accident. Since no-fault laws vary from state to state and can change over the years, you might want to call or visit the website of the Pennsylvania Department of Insurance if you have any questions.

PA Car Insurance Minimum Coverage Requirements

Under Pennsylvania law, you are required to have bodily injury coverage in a minimum amount of $15,000 per person, up to $30,000 per accident. Bodily injury insurance will cover such things as medical expenses, lost wages, pain and suffering, and any legal defense costs you may incur as a result of an accident.

Pennsylvania also requires that you carry a minimum of $5,000 worth of property damage liability car insurance. Property damage coverage will pay for damage to another person’s property such as a fence, house, or car, as well as any legal costs that may arise from that damage.

Personal injury protection, or PIP, is required by Pennsylvania state law as well. There are different levels of personal injury coverage available, but the minimum amount required is $5,000. Pennsylvania calls the minimum amount required First Party Benefits-Medical. If you are in an accident, this coverage will pay for related medical and surgical expenses, rehabilitative services, such as physical therapy, any necessary dental, psychiatric, and optometric expenses, ambulance and nursing services, and required medications, medical supplies and prosthetic devices. The policy will only provide benefits to you, any other drivers listed on the policy, and any relatives living in the same home as you.

PA Tort Laws

In Pennsylvania, you must choose a tort option. A tort option defines your right to compensation if you, or any members of your household, are injured by another driver in a car accident.

The limited right to recover damages, or limited tort, provides limited benefits. While you will be covered for all medical and other expenses as a result of an accident, you will not be able to receive compensation for pain and suffering, or other non-monetary damages unless your injuries are serious, such as a life long disability or death. If you choose the limited tort option, your premiums for property damage, full first party benefits, and income loss coverage will be lower than if you choose the full tort option.

If you opt for the full tort coverage, your rights to recover financial compensation are not restricted. Under full tort, not only will you and other members of your family be able to recover damages for medical and other expenses, but you can seek full financial compensation for pain and suffering, and other damages for injuries you received that were caused by another driver in an accident. If you choose the limited tort option, your premiums for property damage, full first party benefits, and income loss coverage will not be reduced.

Optional PA Auto Insurance Coverage

Optional liability coverage in Pennsylvania includes first party extraordinary medical coverage. This type of coverage may give you and any members of your family medical benefit coverage in an amount up to $1,000,000. If you choose this coverage, it will take effect once the limit for your medical expenses has been reached under your personal injury protection insurance.

First party income loss coverage will pay you up to 80 percent of your lost earnings if you are unable to work after being injured in an accident. This coverage is limited to $2,500 per month with a cap of $50,000.

You may also personal the optional first party accidental death car insurance coverage. This type of coverage will provide a death benefit of up to $25,000 if you or a member of your family living in your home dies from injuries sustained in an accident for a period of 2 years after the accident occurred. The $25,000 will only be paid to the designated beneficiary that you will name at the time you purchase this coverage.

First party funeral coverage is another car insurance coverage option you can choose in the state of Pennsylvania. This policy will pay $2,500 toward any funeral expenses if you or a member of your family living in the same household dies as a result of a car accident.

While not required under Pennsylvania law, you may want to also purchase uninsured/underinsured motorist (UM/UIM) bodily injury coverage. This will pay for any expenses such as medical, lost wages, injuries sustained in a hit-and-run, and other general damages in the event you are injured by another driver who is either underinsured or uninsured.

You can also purchase the optional uninsured motorist bodily injury car stacking policy. This option will let you increase the limits for uninsured motorist bodily injury coverage. This coverage will, however, increase your car insurance premium.

In addition to all the liability insurance options available in Pennsylvania, you may want to purchase some type of vehicle coverage such as collision, comprehensive, emergency road service, rental car limits, loan/lease gap coverage, and customized equipment policies.

Collision coverage will pay for repair or replacement cost of your car if it has struck another car, object, or has rolled over. Collision coverage cannot be purchased without purchasing comprehensive coverage as well.

Comprehensive coverage will pay for damage from such things as falling objects, fire, certain natural disasters, vandalism, theft, glass damage, and damage caused if you hit an animal.

If you have a loan on your car, or lease your car, the bank or other financial institution may require you to have both collision and comprehensive coverage on your car.

Customized equipment coverage will pay for any special equipment permanently installed on your car, truck, or van such as running boards, brush bars, roll bars, fog lights, bed liners, etc. You can only purchase customized equipment coverage if you have both comprehensive and collision coverage as well.

The optional loan/lease gap insurance available in Pennsylvania will cover the actual cash value of you car at the time of loss, and any greater amount owed at the time of the loss, if your car gets damaged in an accident. This does not include any deductible, unpaid finance charges, excess mileage, or wear and tear charges, and any payment under this type of coverage will not exceed 25 percent of the actual cash value of your car at the time of the loss.

Pennsylvania High Risk Car Insurance

The state of Pennsylvania also has an Assigned Risk Plan. This program offers high risk Pennsylvania car insurance to drivers who are not able to get certain types of coverage. You may need to use this plan because of your driving record, type of car you own, or if you have an unavailable motor vehicle record.

Pennsylvania Rental Car Insurance

Many PA drivers agonize over whether they should purchase rental car insurance. While it is true that your regular PA auto insurance policy will travel with you and cover you even while driving a rental car it is important to make sure that your regular auto insurance policy has all of the coverage that you will want while driving the rental. For example, if you have a very bare bones regular Pennsylvania auto insurance policy then you may want to consider purchasing the rental car insurance.

Finding The Cheapest Pennsylvania Auto Insurance Company

While no one PA car insurance company is the cheapest for everyone it is certainly true that PA has a number of top auto insurance companies. Here is a listing of some of the best:

AIG

SF Insurance

Allstate

Esurance

Progressive Direct

GEICO

Liberty Mutual

Be sure and compare rates from at least 5 different companies in order to find the best policy for your needs.

Compare Pennsylvania Car Insurance Quotes Online

With all the options for car insurance available in Pennsylvania, it may be wise to shop around online for the best rates and coverage. You might want to do a side-by-side comparison of rates, and services available at several different car insurance companies. A little time and research may save you hundreds of dollars on your car insurance policy in the state of Pennsylvania.

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