Whether you want to cover outstanding debts, such as mortgages, or provide an inheritance for your beneficiaries, life Equine Insurance can help. It can also help pay for burial expenses.
Most policies provide a death benefit that’s paid to your beneficiaries in a tax-free lump sum. You can borrow money from the policy’s cash value account at a variable rate of interest, but outstanding loans will reduce your death benefit.
There are many types of life insurance policies that differ in terms of premiums and coverage. The type of policy you choose should depend on your current and future financial needs, including the amount of debt you have, other income streams like a pension or 401(k), and assets such as rental properties.
Term life insurance is usually the most affordable option, but it only covers you for a limited period of time. Permanent life insurance, such as whole and universal policies, typically lasts for the insured’s lifetime and includes a savings or investment component. These policies may offer a variety of benefits beyond covering funeral costs and other immediate expenses, including leaving a financial inheritance for loved ones or charitable giving.
Many permanent life insurance policies also have a cash value component that earns interest. The cash value account is a separate component within the life insurance policy that can be used to cover temporary financial needs, pay premiums, or even serve as collateral for loans. The amount of the cash value build-up can vary from company to company, but most will have a minimum level guaranteed.
In addition to the life insurance policy’s cash value, certain types of permanent policies also offer dividends. These are a portion of the divisible surplus that the insurer is able to distribute to policyholders based on its experience, expenses, and investments. The amount of dividends you receive will typically be less than the total death benefit and cash surrender value of your policy because there is a surrender charge that can be either front-end or back-end, depending on the policy type. New York Life offers a number of different life insurance policies that feature dividends, including universal and indexed universal policies.
Benefits
When it comes to life insurance, the benefits of coverage include peace of mind and financial security for your loved ones in the event of your death. This coverage can help them cover your debts and other expenses, so they don’t have to sell off assets or rely on credit cards. It can also help with funeral costs and other final expenses.
The cost of life insurance depends on several factors, including your age and health. A person who is older typically pays higher premiums because their risk of death is greater than that of someone younger. Your family’s medical history also plays a role, as does your lifestyle and any hazardous hobbies. For example, a smoker will pay significantly more for life insurance than a non-smoker because smoking increases your risk of a serious illness that could lead to an early death.
Another factor is the type of policy you choose. For instance, whole life insurance provides a guaranteed death benefit and cash value that grows at a fixed rate each year. Whole life policies also often come with a variety of riders, or add-ons that increase coverage, like accidental death and dismemberment coverage.
These riders may also include the option to access a portion of your death benefit while you’re still alive for certain qualified reasons, such as long-term care needs. Some policies even offer a return of premium rider, which means that if you die before your term ends, you’ll receive back the premiums you paid into your policy. Other riders include waiver of premium, accelerated death benefit and additional permanent coverage. In addition, many whole life policies offer dividends, which are a share of the company’s divisible surplus. While these can be withdrawn as cash, many people choose to reinvest them into their policy, which can help their coverage and cash value grow.
Underwriting
Underwriting is the process that insurers use to study a variety of individual risk factors with an ultimate goal of assigning an overall life insurance policy risk assessment. This assessment will determine what kind of coverage — and in what amount — an applicant qualifies for, as well as their premium rates.
The underwriting process can vary from company to company, but most life insurance policies require some level of evaluation of an applicant’s health status, medical history, lifestyle habits and other relevant information. This may include a physical exam, a health questionnaire or a combination of these tests. It is important for applicants to be forthright and honest with their answers to these questions. This will ensure that they are not rewarded with higher premiums due to misrepresentation of information.
Once an applicant’s application and supporting documents are reviewed, the underwriter will determine their coverage eligibility and premium rate. They will also verify medical records from the Medical Information Bureau (MIB) to check for any fraudulent activity, as well as consult actuarial tables (also known as mortality tables) that predict an individual’s chances of death. Depending on the application and medical records, underwriters may be able to offer preferred plus, preferred or standard rating.
Generally, the lower the risk the insurance company assumes, the cheaper the premium will be. However, there are some exceptions. For example, if an applicant has been diagnosed with a terminal illness or other serious health condition, they will likely be assigned a substandard rating. In addition, smokers will typically pay higher premiums than non-smokers. It is important to shop around and obtain quotes from multiple life insurance providers to compare costs and coverage options.
Riders
Whether you are looking for life insurance coverage or to protect a specific asset, riders can help tailor a policy to fit your needs. They are available for both term and whole life policies, and can be added to existing coverage at a reasonable cost. The type of rider you can add will vary depending on the policy you choose, as well as your age and health.
Some riders are offered for free, while others come at an additional cost and may require a medical exam. For example, a spousal rider will pay out if the policyholder’s spouse dies. However, it doesn’t provide as much protection as a separate policy for each spouse would. Another popular option is a cost of living rider, which increases coverage by a small percentage each year to keep up with inflation.
Other riders are designed to offer a more flexible way to access the death benefit. For instance, a family income rider can convert the death benefit into an income stream that will continue for a set period after the policyholder’s death. A disability rider will pay a portion of the death benefit if the policyholder is diagnosed with a chronic or terminal illness.
A return of premium rider can prevent the lapse of a permanent life insurance policy if the cash value drops below a specified amount, as long as the premium payments are made. This rider can be especially helpful for those who are unable to pay their life insurance premiums because of a serious illness or injury. Talk to your advisor to see what types of riders are available and how they might benefit you.
Claims
When a policyholder dies, beneficiaries file a claim with the insurance company. The company can then choose to pay the death benefits, deny the claim, or ask for more information before deciding whether to pay.
Life insurers typically require a claimant to submit the original policy bond, the death certificate and other related documents to start the process of settling the claim. They also need to know if the death was accidental or caused by illness, among other things.
A life insurance claim may take several weeks to process. This is because the insurance company has to check its list of policyholders against the Social Security Administration’s death records. It must also investigate the cause of death, and it may have to reexamine its records, as well as those of other companies.
To help speed up the process, beneficiaries should contact the company directly or the financial advisor who sold the policy. They should also examine bank statements to find the policy details and premium payments, particularly if it’s an employer-provided policy. It is also helpful to contact human resources or the benefits department at the decedent’s place of work, especially if they worked for a large corporation.
It’s important to reassess your coverage needs regularly to make sure your policies still align with your current goals and finances. Your needs may change, for example, if you pay off debt or become financially independent, or if your children grow up and move out of the house. In some cases, you may be able to reduce your coverage amount and lower your premiums. However, you should never stop paying your life insurance premiums, because stopping them means you will no longer have coverage if something unexpected happens.
