Personal Finance

A life insurance policy is mortality based insurance contract provided by a life insurance company. The life insurance policy guarantees death benefits to policy holder in the event of death. The life insurance policy has economic value on a human life.

This also can be referred as human life value. Thus, a life insurance policy is vital aspect in our life and it is required to safeguard financial impact in the event of death.

Think about a family which relies on both husband and wife for the income source to pay monthly bills, children’s expenses etc. In such situation, a life insurance policy on both the husband and the wife would be a good idea.

The business associates can also use a life insurance policy to purchase on another’s assets in the event of unexpected death of an associate. An important employee in a business whose death would cause financial danger with the company is often insured with a life insurance policy.

There are two types of life insurance policy – Term Life Insurance Policy and Permanent Life Insurance Policy. The term life insurance policy is for a temporary life insurance need such as the period of time during which children are in school.

On other hand, permanent life insurance policy provides lifetime insurance protection and does not expire until you pay the premiums. It accrues cash value and is designed for long-term or permanent needs. These types of policies include Universal Life, Whole Life and Variable Life.

The life insurance death benefit is generally paid in a lump sum however the beneficiary can choose to obtain the death benefit of life insurance in the form of an annual installment.

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1. How does a life insurance company decide how much a particular policy costs?

The price of a life insurance policy is a life insurance company’s calculation of the amount of cash necessary to gather from each member of the life insurance pool. The price is always dependent on the mortality tables and the calculation of the size of the risk the life insurance company is taking on by being the insurer of your life insurance policy.

2. How does a life insurance company assess their risk in insuring an individual?

When somebody applies for a life insurance policy, the company will inquire about their health status and often require a medical exam. The life insurance company will use information gathered to determine if and how they want to insure the individual.

This determination of “if” and “how” is referred to as “underwriting.” There are not many limits on the type of information underwriters can take into consideration.

3. Do all life insurance companies require a medical examination?

Often companies will require a physical medical examination prior to agreeing to insure an individual. Generally, they have a company doctor that will conduct this examination. This doctor or medical technician may have their own office or may even come to the potential insured party’s home for their convenience. The insurance company should not charge the potential insured party for this exam.

4. What types of questions will the life insurance company ask when applying for a policy?

It is common for life insurance applications to ask the following questions:

Do you regularly use tobacco or tobacco products? Life insurance companies strongly believe that smoking or using tobacco products in any form can make an individual’s life shorter and will charge higher premiums for smokers.

Do you have AIDS, cancer, heart disease, or are you HIV+? Depending on the severity of any health conditions such as these, a life insurance company may sell you a policy at the normal rate or possibly charge you a more expensive price. If the health problem is extremely severe, most life insurance companies will directly reject your application.

Do you have a hazardous career? With more dangerous jobs, companies tend to charge a more expensive price for a life insurance policy. If your job requires an above average amount of risky, life threatening behavior, expect a higher cost for life insurance.

Does your immediate family have a history of fatal diseases or death at a young age not due to an accident? The life insurance company is not barred from questioning you about you and your family’s health history. Diseases that commonly run in the family that are fatal, such as heart disease, Sickle Cell Anemia, or cancer may cause a company to reject your application or charge you a higher rate.

5. What other questions can I expect to be asked?

A life insurance application may ask seemingly unrelated health questions to asses high risk behavior.

Some of these questions may include the following:

In the past seven to ten years have you ever been arrested for driving under the influence? Diagnosed or medically treated for cancer, AIDS, HIV, chronic lung disorder, heart disease, diabetes, stroke, or liver problems? Recommended by a medical professional to cease or reduce drinking alcohol?

Are you currently or have you ever been disabled or forced to retire due to an illness or injury?

Answering “yes” to any one of these inquiries may result in getting a life insurance application denied, it is far better than answering dishonestly and then having a claim refused later down the line. This outcome could result in your beneficiaries getting nothing if you should die.

6. Can life insurance companies use genetic testing to determine whether or not they want to insure someone?

Life insurance companies often use genetic testing to learn as much as possible about their potential clients. By administering a blood test, companies can determine not only what diseases you may currently have, but ones you may get in the future as well. Some states do not permit this kind of testing for health insurance purposes, but generally for life insurance, genetic testing is permitted.

Whole life insurance refers to a policy that pays out an amount of funds to the selected beneficiaries upon the passing away of the policyholder. The policyholder is supported for life.

These policies may be useful to those who want improved cover while they have children dependant upon them and then later want to reduce cover to last their life. Here follows an explanation of whole life insurance.

An Explanation Of Whole Life Insurance:

Whole life insurance covers you for your entire life and not just for a particular period such as term life insurance.

Whole life insurance also builds cash value. This is a return on a part of your premiums that the insurance company invests. Your cash value is tax-deferred until you withdraw it.

Borrowing From Whole Life Insurance Policies:

The earnings on the cash value in the policy can be borrowed against in the form of a policy loan. The death benefit is reduced by the amount of the loan if the loan is not paid off. You may borrow at the present policy loan interest rate.

Whole Life Insurance As Investment:

Usually investment experts agree that life insurance should not be used only as an investment. You should judge your policy choices on the protection it gives and not the rate of return on the investment. The rate of return on a whole life insurance policy is normally low when compared to other investments.

Pros And Cons Of Whole Life Insurance:

The pros of whole life insurance:

– The policy lasts your entire life.

– Your annual premiums are fixed.

– Part of your premium is invested for you.

The cons of whole life insurance:

- Fixed premiums are more expensive than term premiums.

- Whole life insurance may be a less smart investment than other investment opportunities.

Most people do not have life insurance after the age of 65.

Juvenile Whole Life Insurance:

Juvenile whole life insurance works like most other whole life insurance plans. The child gets insurance protection for her whole life as long as the premiums are continually paid.

The paramount way to protect your whole family is by having ample life insurance for yourself. However, buying life insurance for your children can give them benefits in addition to what your own life insurance policy may offer to them.

Online Whole Life Insurance Quotes:

Getting a whole life insurance quote online does not have to involve too much research on your part. Hunt for a trustworthy whole life insurance company yourself or use one of the many web sites out there that do all the searching for you. You may then log onto the various sites and check out the rates for whole life insurance. If you have a local life insurance company, you may want to ask their advice. Since there are normally more than one life insurer represented in every town, you may want to compare their life cover products to see which is the best life insurance policy for your needs.

Most life cover policies cover aal the basics but be warned – if you are too truting you may pay for being so. Read the policies and if you find it dificult to understand you may ask the policy underwriter’s competition to give their review on the quote. Odds are they will tell you things about the policy that the life cover company did not mention.