Life insurance helps protect your family financially after his death, to help cover the following costs:
- liabilities or debts
- income
- final expenses or funeral costs
- education expenses for a child.
Not all people need life insurance. To determine whether buying a life insurance is a good choice, take into account their age, marital status, who depend on you financially, assets, import amount of debt you have and if you have to cover estate taxes (estate taxes by name in English).
Before buying any type of insurance, make sure the agent and company are licensed to sell insurance. To find out if an agent or company licensed, call the Consumer Helpline Department of Insurance (Texas Department of Insurance Consumer Help Line, for its name in English) at 1-800-252-3439. You can also view information about an agent and a company using search functions Agent (Agent Lookup, by name) or Search Company (Company Lookup by name in English) on the website of the Department of insurance Texas (Texas Department of insurance TDI by name and acronym in English) in www.tdi.texas.gov.
Basic information about Life Insurance
People buy life insurance to ensure that beneficiaries have enough money to maintain their lifestyle after the insured dies. The beneficiaries are the people you designated to receive the money from the life insurance policy after you die. This money is known as death benefit.
You can designate one or more beneficiaries. If you designate more than one, you must decide how to divide the money. You can also select a secondary beneficiary or contingent beneficiary to receive the money if the primary beneficiary dies before you. Life insurance is not an investment. An investment is a financial risk because you could make money but could also lose some or all of your money. In contrast, life insurance pays a death benefit guaranteed.
Some types of life insurance, as ordinary life, universal life and variable life, can accumulate a cash value, which you could use as retirement income. Agents and companies can not relate to life insurance as an investment or as a source of retirement income. If an agent or a company trying to sell you a life insurance policy as a good investment, be careful. Also, do not confuse life insurance annuities. Often people buy annuities for retirement because they can provide steady income over a long period.
Insurance companies use a process called underwriting to decide whether it will sell life insurance to someone and what prices to charge for insurance premiums. The company will consider several factors to determine how much to charge for the insurance premium. These include:
- your age
- sex
- medical condition
- if you smoke
- hobbies and occupation.
A young applicants and people who are in good health, do not smoke and have no hobbies or hazardous occupations will be charged lower premiums because the company expects these policyholders live longer. Applicants who are older, who have health problems, smoke or have dangerous hobbies or occupations are likely to pay more.
Companies can charge a higher premium insurance or may decide not to sell you a policy because of their potential risk. If a company does not sell you a policy, keep looking. The underwriting guidelines vary from company to company. You may find coverage with another company.
Who Needs Life Insurance?
If no one is financially dependent on you, you may not need life insurance. If you have people or family members who depend on you, you might want to have enough insurance for your family to pay their debts and to provide some income. Consider your circumstances and the type of quality of life you want your dependents have when deciding whether or not to buy life insurance and how much to buy.
To help you decide if life insurance is right for you, ask yourself the following questions:
- Do you need to replace your income to keep your spouse, children or other family members?
- Do you have debts, such as mortgages, credit cards, student loans or other debts?
- You want to help their children pay for college?
- Will they need money your survivors to pay their funeral expenses or the cost allocation of your assets?
- Do you have a lot of assets that may be subject to state or federal taxes?
If you answered yes to any of these questions, you should consider buying life insurance.
How to Buy Life Insurance for you or for someone else
You can buy a life insurance policy for you or for anyone else grants you permission and agree with the assurance process of the company. The person who buys the policy is the insured or policyholder, and is responsible for the payment of insurance premiums.
People usually buy life insurance for themselves, to provide money to your spouse, dependent children or other family members. In some cases, you may want to buy a life insurance policy for someone else and appointed yourself as beneficiary. For example, if you are divorced and gets alimony (child support, by its English name), you may want to buy an insurance policy life for your former spouse to make up for loss of maintenance in case your former spouse died.
Creditors can buy life insurance policies for people who lent them money. The death benefit of the policy will cover the loan balance if the person dies before you pay off the loan. Sometimes businesses buy policies to cover the lives of their employees or partners that are important to the company. This is known as insurance company or agreement of sale.
Types of Life Insurance
There are different types of life insurance: term life insurance, permanent life insurance, a combination of both and accidental death and dismemberment.
Term Life Insurance
Insurance policies term life are generally less expensive and less complicated than permanent life policies. There are two types of insurance policies term life: life term policy renewable annually (annual renewable term, by name) and level term (level term, by its English name):
The life term policy is annually renewable for one year, in which the insurance premium is adjusted each year based on your age when you renew the policy.
A level term policy is sold with terms of five, 10, 15, 20, 25, 30 or more years. The insurance premium is designed to be the same during the period of the term. Some level term policies to ensure that the insurance premium will not change, but other policies only guarantee that the insurance premium will not change for some years, although the term is longer lasting. It is important to read the policy to see how long it is guaranteed that your insurance premium will be the same.
Policies term life insurance typically only they provide death benefit. You pay an insurance premium and if you die during the policy term, your beneficiaries receive the death benefit. Term policies usually do not include a cash value or savings component, and are not designed to provide coverage for life.
The term life insurance are designed to provide affordable coverage for a time when many people need it most, such as when you are starting a family, paying a debt or saving for college.
The term life insurance can be a good option for young families with children. You may only need coverage until your children become adults and have their own income.