Life Insurance: Coverage for you and your family

by zhl203 » Tue Dec 08, 2009 04:26 am
Posts: 10
Joined: 08 Dec 2009

When you have family members depending on your income, saving for the future of your loved ones is a good idea. Investing in life insurance will give you enough financial support to take care of the future of your loved ones when you are no longer around. A life insurance plan also makes provision for a cash value where a part of your premium is put into a savings account. Hence, while you invest for a secured future, you can make savings too.

What is life insurance?

Life Insurance means insuring your life to save for the future of your family. If you have family members depending on your income you may invest in life insurance. This is a contract between you and your insurance company where your insurer agrees to pay a certain amount of money to your beneficiary in the event of your death.

What are the types of life insurance?

  • Term Life Insurance:

    For those who are running on a budget, you can opt for a simple life insurance. Term life insurance allows the beneficiary death benefits for a specific period or 'term'. This term may be 1 or more years and the benefits are paid only in the event of death of the policy holder within the term of the policy.

    There are certain term life insurance that can be renewed for more than one additional term. However, if you do so, your premiums may go higher. You may even sometimes be allowed to trade your term life insurance for a whole life insurance policy.

    Term Insurances are of 5 types:

    1. Annual renewal term insurance: Allows you to renew your term insurance every year till you reach a specific age which often freezes at 65.
    2. Renewable term insurance: With expiry of the term of the policy (generally 5-20 years), you can automatically renew the policy even if your health condition has worsened. It is similar to the annual renewable policy but this one is for a longer period of time.
    3. Level premium term insurance: Ensures that your premiums will not go higher for the term (between 5 and 20 years) of your policy.
    4. Decreasing term insurance: Allows your premiums to stay level throughout while decreasing your cash benefits each year. Such policies are usually used to cover items whose costs decrease with time.
    5. Convertible term insurance: With this policy you may convert your term insurance into any other type of life insurance policy that the company offers.

  • Whole Life Insurance:

    A whole life insurance covers a policy holder for his entire life. There is no date of expiry like in a term life insurance and the death benefits will be received by the beneficiary mentioned in the policy only in the event of the death of the policy holder. If you buy a whole life insurance you will have to pay a higher premium as compared to a term life insurance. The reason for this is that a certain portion of the premium paid for whole life insurance is put away into a savings program.

    When you compare the total premiums paid for whole life insurance and the total premiums paid for term life insurance it is seen that whole life insurance is less expensive. Even if you pay higher premiums for whole life insurance, the fact is that the premiums remain the same throughout the tenure of the insurance. But in the case of term life insurance, you may be paying lesser premiums in the beginning, but as you renew your term policy, premiums will increase. Hence, the total value accrued in term policy is bigger than a whole life insurance.

    Certain clauses in a whole life insurance allow you to pay premiums for a lesser period of time. The greatest advantage in this policy is that the premiums develop cash values that may be claimed or used for purchasing rider policies for more protection. Few of the whole life insurance benefits are:

    • Guaranteed death benefits
    • Guaranteed cash values
    • Fixed annual premiums

    A whole life insurance also known as "straight life" or "ordinary life" insurance, is not just an investment for your future alone, but also for the future of your family.

    To understand the basic difference between term life insurance and whole life insurance click here.

  • Universal Life Insurance:

    Universal life insurance is a flexible policy that provides security for you and your family. To know more please click here.


How to save money on life insurance policy?

When you shop for life insurance coverage, there are certain ways by which you can save money on your policy. You must look for a policy that meets your needs and the right kind of benefits received. If you think that buying a policy with a low premium will save your money think again. If you buy inadequate insurance, it will be a sheer waste of money. However, you can maximize your life insurance dollars using some of the tips provided here.
  1. Seek financially sound companies: Look for companies that are financially strong so that when your beneficiary(s) make a claim, he may receive the benefits of life insurance without hassle.

  2. Shop around: Get life insurance quotes from more than one insurance provider. You may even ask an insurance agent or an insurance broker to get you few insurance quotes from different carriers. You may then compare the quotations and find a policy that suits your needs as well as pocket.

  3. Seek group insurance: Employer provided group life insurance is often given at subsidized rates so you may find a less expensive policy here. Even if you have to pay premiums out of your own pocket this might be a good idea for the subsidized rate they provide. However, premiums paid by you will probably be through payroll deduction which is convenient. But a comparison of group and individual rates depending on your age, health must be done to assess which is the best policy for you.

  4. Change in lifestyle: Maintain a healthy lifestyle. Smoking may rate you as a risk option and you may have to pay higher premiums. Exercise regularly and consider making more lifestyle changes if necessary.

How to decide on the type of life insurance to choose from?

You may go for term life insurance if:
  • You need to make a short term investment and not a permanent one. With term life insurance benefits you can ensure the education of your children if you can invest in time. If there is a debt that you have to pay off, you may invest in term life insurance. Term life insurance covers you for a term of 5 to 20 years.

  • You need a big amount of life insurance with a premium that suits your pocket. A term insurance usually pays only in the event of death of the policyholder. However, if you are alive at the time the policy ends, term life insurance coverage will stop until you renew it. But here, you will not build a savings like in a whole life insurance.
You may opt for whole life insurance if:
  • You need life insurance stretching for the tenure of your life. A whole life insurance would pay the beneficiary the death benefit no matter when the policyholder dies.

  • You feel the need to accumulate a savings on a tax-deferred basis. A whole life insurance has its own savings program that puts aside a certain portion of the amount you pay as premiums into the savings program.
Click here to know more.

Can you pay your mortgage with life insurance?

Yes. With mortgage life insurance your mortgage loan can be paid for in the event of your death in a time when the loan is not paid off fully. This insurance is available for 15 and 30 years where for the first 5 years, the amount of insurance is level and then decreases on an annual basis. The premiums for mortgage life insurance can be paid annually, semi-annually, quarterly or monthly.

How should you choose a life insurance company?

When choosing a life insurance company, take the following into consideration:
  • Identity of companies - Make sure to know the full name, office location and affiliation of the insurance company that you plan to buy from.

  • Product sold - Check out what products the company is selling. Most often the companies provide a wide range of policies. Check for what you need and if they have it you may consider buying from them.

  • Financial Security - Select a company that is strong financially and has been in business for long. Your life insurance is an investment to secure your lifetime. Be sure that your insurance company will make life easy for you and not otherwise.

  • Ethics - Check if your company abides by the codes of conducts and principles of the Insurance Marketplace Standards Association. This non-profit organization promotes ethical conduct in life insurance marketing.

  • Agent - An agent is supposed to help you out with your insurance needs on behalf of the company. You must consider taking help from a reliable person only. If there is any discomfort in dealing with the agent, move to another one.

  • Cost of insurance - Based on your age, type of policy and features, and the amount of insurance to be purchased, compare one insurance company with the others. Find out one which offers a better coverage.

  • Claims - A national claims database will give you the complaints (if any) against an insurance company. You may want to check to find if the company you are considering buying from is listed for consumer complaint.

How does a life insurance company choose you?

Your application for a life insurance policy has to go through the insurance underwriting process before it's approved. The underwriters evaluate the risks associated with your application and forward it to the insurance processing department of the company.

Factors that influence underwriting procedure for Life Insurance
  1. Age of the individual to be insured.
  2. Gender of the person
  3. Pre-existing medical conditions
  4. Medical records of the family
  5. Smoker or non-smoker
  6. Mental health of the person
  7. Occupation
  8. Hobbies or lifestyle habits (activities like race car driving, mountain climbing or bungee jumping might be marked as risky)
  9. Driving records
  10. Credit history
  11. Selection of coverage limits, benefits etc.
  12. Medical reports after thorough health check-up including tests like :
    • > Blood pressure level
      > Blood sugar level
      > Cholesterol level
      > Weight of the individual
      > Urine tests
      > Blood tests
      > EKG/ECG
      > X-Rays
      > Stress tests etc.

Click here to know how the above mentioned factors affect the rates of a life insurance policy.

Your life insurance policy might not come to your assistance in your lifetime. However it'll help securing the future of your loved ones when you won't be there to take care of them. A small amount spent at regular intervals will thus be able to give you the sense of security, as you hand over the risks to your insurer. Top

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My parent bought whole life insurance that pays dividends many years ago. The sales representative told my parent that she can stop paying premium in approximately 12 years because the it policy would be able to pay for itself at that time. And at the same time the policy will make annual distributions to my parent. What does that mean? Is there such thing?

The reason why I'm asking is because they're into the 13th year now and they are still paying the expensive premium. When I called the representative, they told me that the account has accumulated certain cash value and dividend, but the accumulated dividend can only cover approximately 3 years of premium.

I did some research, I understand that the cash value is like equity, but is it truly equity like we really own the money? if yes, when can we cash out the equity? if we cash out, the policy terminates? I understand that when the insured dies, the beneficiary would get paid the face amount, but what happen to the cash value? who gets it? Also, what happen if the insured dies of old age (not due to accident), is it still covered by the policy? what happen to the cash value?

Thanks in advance for your help.

Total Comments: 282

Posted: Wed Mar 31, 2010 10:33 pm Post Subject: Life insurance maturity


I wanted to know if I pay certain amt for life insurance policy per month do I get it back when it matures. I mean what will happen to all the premiums I pay? Also if someone is asking me to pay say $50 per month for Life insurance what should I keep in mind before going ahead with them.

I am in california and would like to know what are the options for life insurance that you have?

Would you be kind enough to answer my questions.



Posted: Thu Apr 01, 2010 12:10 am Post Subject:

Ravi . . .

Cash Value life insurance policies issued in California since at least 1-1-2009 will generally have their "maturity" set at age 120 or 121, as the result of the 2001 Commissioner's Standard Ordinary Mortality Tabled (CSO 2001). The language of most such contracts will indicate that if the insured has not died by that age, the policyowner (presumably the insured) will receive the proceeds of the policy -- the actual cash value in universal or variable policies, or the face amount of the policy less any outstanding loans or interest in traditional whole life policies.

Generally speaking, the premiums you pay to an insurance company become their money. You will not get it back after the 10-30 day free look period that begins when your policy is delivered to you. Think of it like you would buying groceries at the market. You pay the cashier for your purchase and they keep your money. You have what you wanted, they have what they asked you for. If you later return an item, you get a refund, but it's really other people's money being paid to you.

Cash value policies, however, have special "nonforfeiture" provisions that prevent an insurance company from collecting your premiums for many years and you having nothing to show for it. You could get back some of what you have paid (after at least 2-3 years), but you will not get back 100% of what you have paid in unless you keep the policy going nearly to age 121. (Complex policies like Variable Life or Variable Universal Life, which tie cash accumulation directly to the stock market, can achieve greater cash accumulation in a shorter period of time -- but for $50 per month, it's highly unlikely that you are being offered a Variable policy. If you are, I can tell you with all confidence that amount of money is insufficient to support almost any Variable policy.)

Some term life policies are available with a "Return of Premium" (ROP) rider that states if you keep the policy in force to the last day of the 20 year policy term, the insurance company will send you a check for the value of the premiums you paid in all those years. It's still being paid to you, technically, with other people's money. But again, $50 per month will probably not buy you a substantial death benefit with a Return of Premium option.

Buying life insurance should not really be connected to what YOU will get out of the policy. Fundamentally, life insurance policies are designed to protect others against the lost income your death would represent. Some insurance agents will try to sell you on the concept that YOU can have your policy's cash value "tax free" in later years, but they fail to explain how this disrupts the death benefit for your beneficiary. And the words "tax free" should not really be associated with life insurance, except for the death benefit payable to your beneficiary.

Insurance is an "aleatory" contract -- there is an unequal giving and receiving within the contract. You might pay two premium payments and die, and the insurance company pays your beneficiary $1,000,000. On the other hand, you might pay premiums for 20 years and never die, and the insurance company keeps all of the payments. All insurance is essentially like this, not just life insurance.

if someone is asking me to pay say $50 per month for Life insurance what should I keep in mind before going ahead with them.

There is no simple answer to this question. Your $50 might be purchasing a $10,000 whole life policy or a $1,000,000 5-year term policy. What you should keep in mind, regardless of the cost, is whether or not the policy will serve the purpose you intend.

What is your reason for wanting life insurance? To leave money to pay for a funeral? To fund your child's education? To provide your spouse with a comfortable lifestyle that would have been supported with your income if you had not died? To pay off your mortgage? To pay estate taxes (none this year, but they're coming back next year)? These are just a few of the questions that are important to consider. But they are not the only ones.

what are the options for life insurance that you have?

Life insurance comes in two basic categories. TERM -- a policy that provides protection for a specific period of time (between 1 and 20 years or longer) -- and CASH VALUE -- a policy that has a duration to age 121, requires premium payments in all those years (although there are payment options that would allow you to fully pre-pay the policy in 10 or 20 years or in the number of years to your age 65 or 70).

TERM policies may be renewable (although the cost will increase with age) or convertible (without proof of insurability) to another policy which may be more favorable or suitable for your needs in later years.

CASH VALUE policies come in a variety of "flavors" from plain vanilla Whole Life, to policies called Universal Life, which are basically term policies with cash value accumulation, to Variable Life policies which include cash accumulation directly tied to stock market performance. And in between are all manner of variations.

For a stated amount of money (such as $50 per month), TERM insurance will provide substantially more protection than any other type of CASH VALUE policy. The amount of protection is also dependent on your age and insurability.

Whether term or cash value, all life policies have PROs and CONs that you must be aware of before you make a decision as to which one best fits your purpose for obtaining the insurance. An agent must be willing to share this information with you. If they are reluctant to answer your questions, you should not do business with them.

Aside from all of this, the other thing to keep in mind is the insurance company itself. Have you ever heard of it? If you haven't, what can you find out about it other than what the agent tells you?

You would want to look at independent rating agencies such as A.M. Best, or Moody's, or Standard & Poor's to see what they have to say about the company's ability to pay claims, understanding that these are not guarantees that the company will be able to pay claims. But they are a good measure of what the company is like today. An A++ or A+ company is probably not going to leave you hanging out to dry, while a B- company might give you a reason to look somewhere else for your coverage.

You would also want to check the California Dept of Insurance website for its information about the company, such as disciplinary actions and consumer complaints. The CDI does not endorse or promote one insurance company over another. They provide unbiased information based on actual data.

If you would like to know more, feel free to send me a private message with your contact information (email address or telephone number) and I will be happy to give you more advice or a second opinion. My email address is

Posted: Mon Apr 26, 2010 11:34 pm Post Subject: My mother

Do you or can you insure for term life an 86 year old female?

Posted: Mon Apr 26, 2010 11:38 pm Post Subject:

There is no term insurance for an 86 year old. Transamerica offers permanent coverage guaranteed for life, but it won't be cheap. Most 86 year olds would have a very hard time qualifying medically to get the coverage.

Posted: Thu Apr 29, 2010 02:54 pm Post Subject:

About the only life insurance a person 86 years old might qualify for is a funeral "pre-need" policy. But, then again, at age 86, that person is so close to "need" compared to being "pre-need" the cost will be relatively astronomical. And the policy would most likely be limited to $10,000-$25,000.

Posted: Thu Apr 29, 2010 03:02 pm Post Subject:

About the only life insurance a person 86 years old might qualify for is a funeral "pre-need" policy. But, then again, at age 86, that person is so close to "need" compared to being "pre-need" the cost will be relatively astronomical. And the policy would most likely be limited to $10,000-$25,000.

Transamerica writes up to age 89. So does John Hancock, American General, and Reliastar. At preferred rates it would still take 11-13 years to pay up the death benefit. Standard rates aren't that much more at that age. Example:

$25k - $2,349/year
$100k - $8,238/year
$250k - $19,343/year
$1 million - $77,370/year

Posted: Thu Jun 10, 2010 12:02 pm Post Subject:

HI, I think this website will be helpful. it gives total information about life Insurance and details .. check it..

(link deleted by Moderator InsTeacher per Terms of Use)

Posted: Mon Jun 28, 2010 11:17 pm Post Subject: I need advice please...

My father in law passed away years ago hence my mother in law (though divorced from him) collected SS benefits. She passed away 2 months ago very quickly. There are 3 sons all over the age of 40. She owned 2 homes, one was paid off and the second payments were being made that included a $9.50 life ins. payment. Two of the sons were given 1/2 of each of the houses due to the third afflicted with HIV, has been on medication for 22 years causing him to often act irrationally; legally, physically, mentally, off the wall inhumain things. She didn't want him to make a bad judgement and there goes one of the houses so that's why she chose to do it that way. But now he has taken all of their mothers paperwork, every single form, policy and contract and states he's lost them all and doesn't know where they are. The two sons have a house payment stub to pay the mortgage to and that's it. Is there anyway they can find out any information on any of the lost records. It's very frustrating for the two sons. I've been separated from my husband for 7 years with intentions to divorce this year so there's nothing in it nor do I deserve from it for me. My husband lived with his mom in her home during the last 6 weeks while she died from adenocarcinoma. He was her favorite and unfortunately never denied showing that fact to anyone, even her other sons. During the last week before she died she had fallen from being so weak and as my husband picked her up off the floor she begged him to hold a pillow over her face and sufficate her to death to put her out of her misery. I think my husband deserves to be able to complete his grieving process by taking care of all the loose ends, find Peter to pay Paul and know that he did all the right things and was the responsible, respectable son his mother need him to be. Any suggestions?...

Posted: Mon Jul 05, 2010 05:11 am Post Subject: My Mother

I need to get Life Insurance for my mother she is 53 years old and has quite a few health issues the main one being COPD. I'm not real sure on how to do this I am her youngest daughter so I don't have life insurance myself, but i'm not sure that I will be able to really let her know she has the reading and writing ability of an 8 year old so she doesn't comprehend things real well. How would i go about getting insurance for her without her really knowing, and what kind of information would i need to have for it. Thank you very much for the help, I realize that this is unusual but I'm only in my early 20's didn't think I would have to make these decisions. So Thank You.

Posted: Mon Jul 05, 2010 05:32 am Post Subject:

You won't be able to get insurance without her knowing about it. You're going to have to explain it to her and if she has COPD on top of other health issues, you really need an independent agent to shop the health history with multiple companies to get the best offer.

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