Nobody likes to think about dying, but worse is the idea that one’s family will be placed in a position of financial hardship if this were to happen. The best way to ensure that loved ones are protected financially is to purchase a life insurance policy. Not all policies are the same however, so in order to select the most suitable type of life insurance Chicago customers need to first do a careful assessment of their needs.
Some people have life coverage through their employers, these policies can be useful but offer less flexibility than individual plans, cease to be in effect upon termination of employment, and may provide less coverage. When assessing one’s needs, it’s important to find out the particulars of any group coverage and take this into consideration.
The four main types of life policies are term, whole, universal, and variable. Term coverage has a specified period within which the recipients will receive benefits if the insured dies. Upon expiration, it can be renewed, but usually for a higher premium because the policy-holder will be older. This is the most popular type of policy, because it has a choice of terms, is tax-free, and provides good coverage for the price paid.
Whole life coverage works in such a way that the premium paid is partially reserved for death benefits and the rest is used for a hedge fund, as a result the premium is somewhat higher, as is the agent’s commission. Unlike term policies there is no expiration on this plan. Interest accumulates on the savings, but at a relatively slow rate, so it’s best for those who wish to retain the policy permanently, or they might lose money on it.
A universal policy gives the insured a fair amount of flexibility in terms of how much benefits are paid, and the amount and frequency of the premiums. The money is paid into an investment fund from which administrative costs and the death benefits are taken. This fund is subject to gaining interest according to current market rates, which can have either a positive or negative effect on its value.
Variable life insurance policies are those which involve investing one’s money into a choice of assets such as stocks and bonds. The amount of one’s tax-free death benefit depends on how well these chosen investments perform over time, which can be risky or very profitable. If one chooses to surrender the policy, they will receive the taxable cash value, however no minimum is guaranteed and it may become zero.
There are different ways a customer can purchase insurance, although the safest bet is to deal with an agent who represents an insurance company with a solid foundation. Besides being licensed in one’s state, a good agent will answer any questions his or her clients may have, won’t pressure them into making a decision, and will ensure that they understand exactly what they are getting for their money.
In order to apply for coverage, the applicant will need to fill out a questionnaire and possibly get a physical. All relevant health information must be disclosed fully and questions answered honestly. The company will decide whether to insure the applicant based on this information, and if they do it will be used to determine the premium.
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