Final Expense Life Insurance: What You Need to Know

  • Life Insurance

Also known as burial or funeral insurance, final expense life insurance is a variant of whole life insurance designed to cover a single expense after the policyholder passes away. Often aimed at seniors, these insurance policies have reasonable monthly premiums but generally pay much smaller death benefits than term life insurance policies.

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What is Final Expense Life Insurance?

Final expense life insurance is a whole life insurance policy that releases a lump sum when the policyholder dies. It charges a fixed monthly premium and generally offers a simplified sign up process, with few complications, fast decisions, and no medical exams.

Policyholders use final expense life insurance to protect their loved ones after their death. It’s often taken in lieu of a traditional whole life policy or term like policy, with the former not available to seniors and the latter proving very costly and limited. 

Policyholders can add a beneficiary to their final expense life insurance policy to ensure that the money goes to this individual when they die. They can also arrange for the money to be paid in monthly or yearly installments, although considering the purpose of this policy is to cover “final” expenses that may arise or remain after death, it’s often best to release it as a lump sum.

Who Can Benefit from Final Expense Life Insurance?

You can benefit from a final expense life insurance if you:

  • Have dependents
  • Don’t have a whole life or term-life policy
  • Have sizeable debts
  • Are worried about funeral costs

Think about what will happen when you die. It’s a morbid thought to have, but it’s important to see things from your family’s perspective.

Can they afford to provide you with an honorable send-off; can they afford to clear your debts? Will your death impact them financially or will you leave them with enough cash and assets to cover necessary expenses?

Your loved ones need time to grieve, to mourn your loss. They shouldn’t have to worry about financial issues, as that will just make a bad situation worse.

What is Final Expense Life Insurance Used For?

You can use final expense life insurance to cover any costs that your loved ones would otherwise be required to pay. The most common uses for this type of life insurance include:

Funerals

The average funeral costs close to $10,000, and those costs are rising. It’s one of the five biggest expenses that the average American will incur during their lifetime, and unlike a wedding, car or home, it’s not something you can simply avoid by going without, nor is it something you can delay until you have more money.

If you die, your loved ones will need to cover these costs quickly and completely, and while you might want them to cut costs and avoid spending too much, they will want to ensure that you have the best possible send-off. 

The only way to guarantee that you have a good funeral and they don’t bankrupt themselves is to cover the costs before you die.

Final expense life insurance can be paid directly to your loved ones or to the funeral home. In the case of the latter, you can plan your funeral yourself, choosing products and services based on the value of the death benefit that will eventually be paid to the home.

Of course, you can’t be sure that the funeral home will honor all of your requests or even still be operating by the time you pass, so unless you don’t have anyone who can arrange your funeral, we recommend paying the death benefit directly to your beneficiaries.

Medical Bills 

You are predicted to spend over a quarter of a million dollars on healthcare during your lifetime, most of which will occur in the final decade of your life. That’s a huge sum of money to spend on anything, and it’s a terrifying prospect to think that this money could be passed onto your loved ones.

In most instances, your loved ones won’t be responsible for your debt, but there are exceptions. What’s more, all medical debt charged during the final months of your life will be at the head of the queue to take money from your estate when you die. If that debt strips your assets bare, it means your loved ones won’t get anything and may struggle to cover their own debts and expenses.

With final expense life insurance, you can use a death benefit to repay those medical bills and remove the burden of responsibility from your loved ones.

Debt

Unsecured debt is often at the back of the queue when it comes to taking money from your estate. However, if you live in a community property state or your partner cosigned on the debt, they will be responsible for it.

You also have to think about mortgage and auto debt. These loans can pass onto your heirs, who will then be tasked with continuing the repayments if they want to keep the assets. If they don’t have the money, they could lose those assets, and this is where a final expense life insurance benefit can help. 

Frequently Asked Questions about Final Expense Life Insurance

Still got a few questions about final expense life insurance and its many nuances? We have answered some of the most frequently asked questions below to lend a helping hand.

How Much Does It Cost?

Final expense life insurance varies depending on your age, sex, weight, smoking status, and whether or not you have any preexisting medical conditions. Generally speaking, a woman between the age of 50 and 55 can expect to pay between $30 and $40, while a man of the same age will be charged between $40 and $50.

This cost increases as you age and while you can still apply when you hit 80, you can expect premiums as high as $200 a month, or $2,400 a year. 

Why Does it Cost So Much?

The costs are higher than term-life insurance because the risks are greater. Unlike term-life insurance, the term will not expire, which means the odds of the recipient receiving the death benefit are higher. 

Of course, there is still a chance that they will fail to meet their payment obligations, at which point the policy will void, but such instances are rare for this particular type of insurance.

Does it Expire?

Your final expense life insurance policy will remain active for as long as you make your insurance premiums. It will not expire like a term-life insurance policy, but you will lose it if you stop making payments while you are still alive.

Does the Money Have to be Used for Funeral Costs?

Not at all. The insurance company doesn’t care what the money is used for as it doesn’t impact their bottom line. There is also nothing preventing your loved ones from pocketing the cash and burning your body in the garden, if that’s what they choose to do.

We don’t mean to sound bleak, but the point is, there are no restrictions or limits and your loved ones are only bound by your word and their promise, so if you want the money to be used for a specific purpose, make sure you get everything in writing lest they forget.

How Much is the Death Benefit?

Final expense life insurance typically pays around $20,000 and is always less than $50,000. It’s a small sum when compared to many term-life insurance policies, but that’s because it serves a specific purpose and is not designed to clear mortgages or cover one or more family members for the rest of their life.

Is There a Medical Exam?

Because the payout is less than $50,000, a medical exam is rarely required. You will be asked some basic health questions and you need to be honest during this process, but in most cases, you will not be required to undergo a medical exam.

Source: pocketyourdollars.com

How do Life Insurance Companies Make Money?

  • Life Insurance

Life insurance seems like a pretty good deal. You pay $30 a month for 20 or 30 years and in the event of your death, your family gets a sizeable cash sum, often in excess of $250,000. Every 12 seconds someone dies in the United States and these deaths occur across all demographics (although the majority are over 70) and from a myriad of causes.

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Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

If a life insurance company can afford to pay a $500,000 sum on a policy that’s collected less than $20,000, how can it afford to stay in business when life is so fragile, death is always a certainty, and they’re in it for the profit?

Contrary to what you might think, insurance companies don’t rely entirely on luck or underhanded tactics to stay in the black. There are actually three ways that an insurance company makes money and ensures those profits remain stable.

Underwriting

Underwriting is the process of taking a calculated financial risk in exchange for a fee. The word was coined as the underwriter, the “risk-taker”, would sign their name underneath a detailed outline of all risks they were willing to take.

Underwriting is performed by all life insurance companies and it’s a careful, considered process through which they can balance their profit and loss. There is no guarantee with the underwriting process and it’s not uncommon for them to lose money over the course of a financial year. However, what they lose one year may be offset by what they earn in another year.

How Insurance Companies Profit from Underwriting

Insurance is based on statistical analysis and probability. If you’re a healthy 20-year old with no preexisting medical conditions and no genetic issues, you’re considered to be very low risk. 

An insurance company may offer you a $500,000 payout on a 30-year term in exchange for a policy that costs less than $1,000 a year. They’re only making $30,000 over the term, but they know there’s a good chance you’ll live well beyond your 50th year, which means all of that $30,000 is profit.

In fact, statistically speaking, a 20-year old has a less than 6% chance of dying within 30 years and this applies to the general population. Once you account for medical issues, family health problems, smoking, drug use, dangerous jobs, and a plethora of other high-risk conditions, that figure drops to an infinitesimal sum.

The insurance company knows that if they have 50 healthy 20-year-olds on 30-year $500,000 policies, there’s a good chance that between 0 and 2 will collect. This means they will collect $1.5 million and payout between $0 and $1 million. 

The odds of a 20-year-old dying within that term increase if they have abused drugs/alcohol in the past, have a preexisting medical condition or their parents died of genetic disorders before they turned 50. In such cases, the underwriters will calculate the risks and create a policy that allows them to cover their costs.

By the same token, a life insurance company may refuse to provide a 30-year term to a 52-year-old, because according to the statistics, one out of every two will die within that term and they simply couldn’t offer realistic premiums.

Of course, these are just rough estimates, but it gives you a general idea of how life insurance companies operate. It’s also the reason why your premiums increase significantly if you are a smoker (smokers live 10 years less on average) are obese (obesity is considered to be as much of a mortality risk as smoking) or have a problematic medical history.

Canceled and Lapsed Coverage

Your life insurance policy can stop or be canceled at any time. Let’s return to the example of the 20-year-old paying premiums worth $1,000 a year. They may have taken out the life insurance policy because they just got married or they experienced a bout of paranoia after learning about a friend who died young.

But what happens when that relationship ends and that paranoia fades away; what happens if they go from being comfortably employed, to unemployed and desperate? They’re not the ones who will benefit from that payout, so they may decide that they’re just wasting their money, in which case they stop making the payments and the policy lapses. If this happens, the life insurance company gets all of the premiums and none of the liability.

Whole life insurance policies can also be cashed out. They build money through dividends and this entices the owner to give it all up for a big payday. If they’re struggling financially and realize they have a big balance waiting for them on their life insurance policy, they may be tempted to cash the check, close the account, and walk away with the windfall, thus removing all liability from the insurance company.

Refusing to Pay Out

Life insurance companies can also make money by refusing to pay out and pointing to a discrepancy. This is not part of their business strategy, and they don’t actively seek to scam their customers because, quite simply, they don’t need to. Thanks to underwriting, cash outs, lapse policies and investing, life insurance is a profitable enterprise without needing to resort to underhanded tactics.

However, they can and will refuse payouts if they determine that the contract was somehow breached. This can happen in any number of ways and for a myriad of reasons:

The Cause of Death Wasn’t Covered

Most causes of death are covered by most life insurance policies. However, there are some exceptions, including suicide. Many policies refuse to cover suicide at all, while others refuse to cover it if it occurs within the first 2 years of the policy.

More than 40,000 people take their own lives every year in the United States and it’s a common issue across all demographics. It’s also on the increase and is now the 10th biggest killer in the United States. 

As heartless as it might seem for an insurance company to refuse a payout for someone who took their own life, it’s important to remember that their underwriting is based purely on probability, and because suicide is one of the biggest killers in young men, it’s something that has to be considered.

The policy should state clearly which causes of death are covered and which ones are not. It’s also something you can discuss with the insurance company when you take out your policy.

Important Information was Not Disclosed

This is the most common reason for a payout to be refused. In some cases, the applicant is looking for cheaper premiums and knows that a few seemingly innocent lies will shave tens of dollars off their premiums. 

The policyholder may also assume that certain information isn’t relevant or be too ashamed to disclose it. For instance, if they were cautioned for driving under the influence of drugs or alcohol it may not seem relevant to the underwriting process, but if they die in a road traffic accident it could prevent a payout.

In the majority of cases, however, they simply forget. A life insurance policy is something you fill out in one sitting and something that requires you to list all previous medical conditions, hospital visits, and health complaints. It’s easy to forget a few things here and there.

There is No Beneficiary

A life insurance policy can only be paid directly to an heir when they are named as a beneficiary. If there is no beneficiary, it will be paid to the policyholder’s estate, from which their heirs can make their claim.

This becomes problematic if the policyholder has a lot of debt, as the debtors will then line up to take their share from the estate. It can also make life difficult for loved ones trying to make a claim on that estate. It’s always recommended, therefore, to name beneficiaries on the life insurance policy and to back this up by writing a will.

The Contestability Period

The above issues become more prevalent during something known as the contestability period. This begins as soon as the policy goes into effect and it can last for 1 or 2 years, depending on the policyholder’s state of residence.

If the policyholder dies during this period, the life insurance company will seek to contest it by looking at all of the details and ensuring they match. They will check the cause of death against previously filed medical reports and will make sure the correct information was supplied at the time the policy was filed and that there are no discrepancies.

Once this period passes, it’s unlikely there will be any issues, but they can still occur. The insurance company may, for instance, investigate the claim if they believe it was purchased for the sole benefit of the beneficiaries (for example, the policyholder purchases it knowing they were going to commit suicide or were about to die).

Summary: Payouts are Rare

Studies suggest that as few as 2% of all term policies pay out, and the most common reason for non-payment is that the policyholder survives the term. This is a statistic that detractors like to quote and it’s often followed by a claim that life insurance is just institutionalized gambling. 

To an extent, they’re right. You’re essentially gambling against a house that always wins and, like a casino, it always wins because, for every player that wins, 10 others will lose. The difference is that life insurance provides some much-needed peace of mind while you’re alive and ensures your loved ones are covered in the event that anything happens to you.

Source: pocketyourdollars.com

Boost Your Credit Score: 8 Helpful Credit Monitoring Apps

October 16, 2019 &• 4 min read by Farnoosh Torabi Comments 2 Comments

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Disclaimer

Maintaining a healthy credit score requires a good bit of focus, determination and hard work. There’s a lot to keep up with: We need to pay our bills on time, reduce debt and maintain a low debt-to-credit ratio, among other requirements—all to ensure a top-notch credit score. We can use all the help we can get! To that end, here are eight credit monitoring apps that can help keep your credit building on track.

1. Credit.com

One of the only truly free credit monitoring apps—most others require you to have a paid subscription to their digital service in order to use the “free” app—the Credit.com mobile app allows you to access your entire credit profile, including your credit score and insight into how it compares to your peers. You’ll see where you currently stand, see how your score has changed—and why—and get credit information and money-saving tips tailored to your score.

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Availability: Apple and Android

Cost: Free

2. myFICO

The myFICO app is free, but it requires an active myFICO account, which means it effectively costs $20 per month or more, depending on which features you want. With this app, though, you can view and monitor your FICO scores—the most widely used credit score—and credit reports. They also provide a FICO Score Simulator, which shows you how your score may be affected if you take certain actions.

Availability: Apple and Android

Cost: Free, but requires an active myFICO account

3. Lock & Alert from Equifax

Lock & Alert from Equifax lets you lock and unlock your Equifax credit report to protect against identity theft and fraud. You’ll get an alert any time your account is locked or unlocked so you know you’re the one in control. A credit lock is not as secure as a credit freeze, but it does offer some level of protection and is generally easier to turn on and off. This app works only for your Equifax credit report, so if you want to lock all three reports, you’ll have to work with TransUnion and Experian separately.

Availability: Apple and Android

Cost: Free

4. Experian

The Experian mobile credit monitoring app lets you track your Experian credit report and FICO score, with an automatically updated credit report every 30 days. The app also comes with Experian Boost, which can help you boost your score. The app alerts you when changes to your report or score occur, and offers suggested credit cards based on your FICO score.

Availability: Apple and Android

Cost: Free, but some features require a paid Experian account

5. Lexington Law

If you’ve signed up for credit repair services with Lexington Law, you can use their free mobile app to keep track of your progress. In addition to providing access to your credit reports from all three credit bureaus and updates on ongoing disputes, the money manager feature, similar to Mint, helps you track your income, spending, budgets and debts.

Availability: Apple and Android

Cost: Free, but requires a paid Lexington Law account

6. TransUnion

The TransUnion mobile app allows you to refresh your credit score and credit report daily to see where you stand. It offers instant alerts if anything changes and offers Credit Lock Plus, which allows you to lock your TransUnion credit report to avoid identity theft and fraud. The Debt Analysis tool lets you calculate your debt-to-income ratio, and it allows you to view public records associated with your name.

Availability: Apple and Android

Cost: Free, but requires a paid TransUnion Credit Monitoring account

7. ScoreSense Scores To Go

ScoreSense offers credit scores and reports from all three credit bureaus and daily credit monitoring and alerts to changes on your reports. This app also provides creditor contact information so you can address errors on your report quickly and efficiently. Score tracking features let you review how your score changes over time and how it compares to your peers.

Availability: Apple and Android

Cost: Free, but requires a paid ScoreSense account

8. Self

Self helps you build—and track—your credit, making it great for people just establishing their credit profile or trying to rebuild damaged credit. Self offers one- and two-year loan terms, but instead of getting the money up front, the amount is deposited into a CD. You make regular payments for the term of the loan (at least $25 per month), and then get access to the money. There is no hard inquiry to open the account, but your payments are reported to all three credit bureaus, helping build your credit. Plus, while you are repaying your loan, you will have access to free credit monitoring and you VantageScore so you can track your progress.

Availability: Apple and Android

Cost: Free, but requires a Self loan repayment of at least $25 per month

Credit Monitoring Apps to Fit Your Needs

With so many different options, you’re sure to find a credit monitoring app that meets your needs. And don’t forget: you can always check your score for free using Credit.com’s free Credit Report Card.

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How to Get Cheaper Life Insurance Policies

  • Life Insurance

Life insurance is essential if you have debts, a mortgage or lots of dependents. However, the older you are, the more expensive it becomes. If you add medical issues and other health concerns to the mix then you might be refused altogether or quoted astronomical premiums that make you question whether it’s worth the protection.

Find the Right Life Insurance for You!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

Fortunately, there are a few things you can do, ways you can improve your chances of securing favorable terms and getting cheap protection for your family.

Choose a Term Policy

Life insurance comes in many shapes and sizes, but all policies are variants of a whole life policy and a term life policy. The former lasts for the policyholder’s “whole life”, but can also be cashed out sooner; the latter is limited to a fixed term of between 10 and 30 years.

To the insurance company, it’s all about balancing expected profit and loss. With a whole life insurance policy, the risks are higher because they will pay out regardless of how long the policyholder lives and can only profit if the payments lapse or the policy is cashed. With a term life policy, the odds are always weighted in their favor because the policies are set to a fixed-term that the policyholder is likely to survive.

For instance, if you’re a healthy 20-year-old, you shouldn’t have an issue getting a full 30-year term because there’s a greater than 1 in 20 chance you will survive it. If you’re 60, your term may be limited to 10 or 20 years, because anything above that begins to tip the balance back the other way.

By opting for a term life insurance, you can place probability in the underwriter’s favor, thus ensuring you are offered the best rates. The shorter the term, the better those rates will be.

Lose Weight

Height and weight are two major factors in determining the likelihood of a policyholder making it to the end of their term. The simple calculations will tell them whether you fall into an “overweight” or “obese” category, in which case your risk increases significantly.

If you’re in these categories, try to lose weight before you apply. Life insurance companies consider obesity to be as much of a risk factor as smoking and every pound you lose will reduce that risk and thus decrease your premiums.

If you have a lot of muscle and an average amount of fat, you may also face some issues as your weight won’t tell the whole story. This is one of the few times when a medical exam is preferred, as that way you can prove you are not overweight and should be considered a low-risk as opposed to a high one.

Quit Tobacco

It’s a no-brainer—smoking massively increases your mortality risk and smokers live ten years less on average. The life expectancy in the United States is just under 80 years. To an insurance company, a smoker is uninsurable beyond that 70th year, making a thirty-year term highly unlikely for anyone aged 40 or more.

Smoking also increases your risk of heart disease, cancer, and a host of other conditions. It’s a huge red flag and one that will increase your life insurance premiums, decrease your payout, and reduce your chances of being accepted altogether.

Saying no to the cancer-sticks will save you a small fortune on your insurance premiums and will also reduce your monthly bills, with the average smoker spending just under $2,300 every month.

It’s not just smoking that life insurance companies focus on. They’ll also penalize you if you chew, sniff or vape tobacco.

Be Careful How You Select Your Hobbies

Underwriters pay very careful attention to what you do in your downtime. If you spend your days shopping, chatting with friends and playing basketball, they’re not going to bat an eyelid. But if your days are spent playing extreme sports, bungee jumping and skydiving, you will be considered high risk.

Some activities are riskier than others and, in some cases, they can make you as much of a liability as obesity and smoking. It’s worth reconsidering your more extreme hobbies if you’re struggling to find cheap life insurance. All the following will make life insurance companies think twice:

  • Boxing/Fighting (if you actually partake in combat and don’t simply train)
  • Skiing and Snowboarding
  • Rock Climbing
  • Deep Sea Diving
  • Base Jumping
  • Skydiving
  • Bungee Jumping
  • Surfing
  • Automobile Racing

Think Twice about Bankruptcy

Bankruptcy can increase your premiums because it is a known contributor to stress, which in turn can increase your risk of heart disease and many other chronic conditions. What’s more, someone who files for bankruptcy is also more likely to commit suicide.

Bankruptcy is never something you should rush into as it can leave a derogatory mark on your credit report that remains for up to 10 years. However, this aspect is rarely considered, even though it could seriously inflate your premiums.

Stay Honest

Honesty isn’t going to reduce your premiums, far from it, but it will make life much easier for your family if anything happens to you. If you lie on your insurance policy and you die during the contestability period, which begins as soon as the policy is active and ends after a year or two, the claim will be refused.

This can happen even if the contestability period is over, as long as the life insurance company can prove that you filed a fraudulent application. Life insurance is something you purchase to protect your family against the unexpected. It’s not something you can predict with any degree of certainty, so lying and hoping that you will swerve the contestability period and avoid any issues is reckless at best and criminal at worst.

Stay honest, keep it simple, and try the other tips in this article to reduce your premiums legitimately.

Summary: Quote and Compare

Some of the things that you might expect to have a big impact on your life insurance premiums actually count for very little. For instance, riding a motorbike will not impact your eligibility unless you ride professionally. By the same token, it doesn’t matter much if you spend a lot of time in the car, providing you’re not racing at high speeds every weekend.

The things you need to focus on the most to get a cheaper life insurance policy are your weight and smoking status. These are the things you can control, the things you can fix with time and perseverance. If you want to see just how much if a difference they can make, get a life insurance quote before you lose weight and/or quit smoking and then get a quote from the same company afterward.

You will be in a much more favorable position and should be offered lower premiums, even though you have aged an additional year or two since you last applied.

Source: pocketyourdollars.com

How to Find Affordable Life Insurance

  • Life Insurance

Life insurance can be expensive and if it’s essential those high costs can leave a nasty taste in your mouth. You may wonder if it’s worth purchasing a policy at all, which could place your family in jeopardy as they won’t have the cover they need when you pass. 

Find the Right Life Insurance for You!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

However, there are a few ways you can bring those costs down and get affordable life insurance. So, don’t despair, and take a look at these top tips for cheap life insurance.

How are Life Insurance Payouts and Premiums Judged?

Insurance underwriters set your premiums and your payout based on the likelihood that you will die during the term. It sounds pretty morbid, but these are for-profit companies we’re talking about and when death is your only liability, there’s no time for gentility. 

It’s something that frustrates everyone who has ever been quoted high premiums, but it’s important to see things from the perspective of the underwriter. If you’re 100 pounds over your ideal weight, your risk of heart disease, cancer, and countless other diseases increases, and you become more of a liability. 

It doesn’t matter how much you convince them that you’re on a diet and will lose all of that weight eventually—as things stand right now, you’re more of a liability than someone who weighs 100 pounds less.

Of course, it’s possible to be 140 pounds and unhealthy, just as it’s possible to be 240 pounds and healthy, and this is an argument that many applicants make. But those are the exceptions. The oldest woman ever smoked until the day she died and made it halfway through her 122nd year, and everyone knows of at least one smoker that continued the habit well into their 70th and 80th year, seemingly unaffected. 

However, the average smoker will die 10 years before their non-smoking counterpart and their risk of contracting a host of diseases increases exponentially for every decade that they stick with the habit. Should a life insurance company dismiss your habit just because of a 122-year-old French woman? Of course not. 

These are statistics and probabilities; they focus on the most likely and the most common. By their very nature, there will always be exceptions and outliers. A life insurance company doesn’t care about any of these because as long as they focus on the events that are most likely (obese policyholders and smokers will die young; preexisting medical conditions are more likely to reoccur than if they didn’t exist at all) the premiums will exceed the payouts and they will turn a profit. 

Start Early

The sooner you apply for life insurance, the better your chances of getting a high payout and a low premium. Age is one of the biggest factors in determining your mortality risk. A 20-year-old has a high chance of surviving a 30-year-term, but for every additional year, those odds decline and by the time they hit 55, the odds are no longer in their favor.

Starting early doesn’t just protect your loved ones if you die before your time, it also gives you more options. This is when whole life insurance policies are at their most beneficial. These will payout regardless, even if you live to be 100. The life insurance company will still benefit, however, because many of these policies either lapse because of non-payment (a lot can happen in those 80 years) or the policyholder takes the cash value.

They’re like a life insurance policy and saving account bundled into one, but they become less viable as you age.

Make Big Changes

You probably knew this tip was going to be here, but it’s worth mentioning: If you smoke, stop; if you’re obese, lose weight. We can’t stress enough how much of a difference these things will make to your life insurance application.

If you’re a smoker and you’re obese, you’re a massive liability. Statistically speaking, you’ll be beating the odds if you make it to your 60th year, which means a 30-year term stops being a viable option when you’re just 31! If that’s not enough to scare you, then there’s nothing we can say that will.

By quitting cigarettes and dropping a few dozen pounds, you improve your chances of living a long and full life, which, in turn, means you’ll get cheaper life insurance premiums.

And these are not the only changes you should consider making. Many applicants fail to calculate just how much of a liability they become when they partake in extreme sports and activities such as base jumping, parkour, sky diving, and rock climbing. Some of these are riskier than others, but in all cases, the underwriter will compare them to the averages to determine your likelihood of dying young.

Roughly 10 skydivers will die for every 1 million that jump on a regular basis. However, more than 40 times as many will die from base jumping and you’re 30 times more likely to die from extreme mountaineering than you are from base jumping. 

Some of these are less risky than you might think. For instance, you’re twice as likely to die from walking than you are from horseback riding, as the former puts you at risk of major pedestrian accidents. 

You’re also more likely to die from getting out of bed aged 45 than you are from SCUBA diving. So, assess the risks, try to look at your situation from the underwriter’s perspective, and make changes where necessary without giving up all the things that you enjoy.

Wait

You can apply for life insurance as soon as you lose weight or give up risky and dangerous activities. You can reap the benefits straight away when you do this, but the same can’t be said for everything. 

Smoking is a great example of this. If you quit smoking today, you will need to wait at least 12 months before that has an impact on your life insurance policy. It only makes sense when you consider the majority of short-term cessations will result in relapse

The underwriter also wants to protect their bottom line, because you won’t start feeling the health benefits until several months have passed and before that time elapses, you’re still a high risk for many diseases and conditions.

Look for Group Life Insurance 

If you can’t get life insurance by applying directly, you may be offered it through an employer. Group life insurance is offered to large groups of people and is typically provided by employers.

You probably won’t get the same extensive cover, but you will get some cover, and this is a great alternative if you’re struggling to seal the deal yourself.

Only Buy What You Need

It’s tempting to get a big payout when you’re buying life insurance as that payout can then provide a good life for your loved ones. But life insurance shouldn’t be like winning the lottery. It’s not designed to allow them to quit work and spend the rest of their lives sipping champagne on Mediterranean cruises.

The payout should cover all of their needs for several years, while also repaying any debts that you (or your loved ones) have. If you have a mortgage, it can also go towards repaying this.

Many life insurance experts recommend that you stick with the absolute basics in situations where the remaining family members can still support themselves. For instance, let’s suppose that you’re a 50-year man in relatively good health. You earn roughly the same money as your wife, but she’s 10 years younger than you and you also have a son at college and a mortgage with $50,000 left to pay.

In this case, the payout should be at least $50,000, plus the size of remaining debts. However, you don’t need to include all debts in this. Some debts, including all federal student loans, will die with you, which means your son or your wife won’t be burdened with them. For example, if you cosigned on a $20,000 federal student loan and also have $10,000 in joint credit card debt, a death benefit of $60,000 will be enough.

That way, your wife can clear the mortgage and debt in full, thus reducing monthly liabilities and putting more money in her pocket at the end of the money. If she ever faces a financial crisis, such as the loss of a job, she’ll have a fully paid house to use as collateral and can take loans and equity loans as needed.

This is the best way to provide for your family after your death without crippling your finances in the present.

And Finally, Take Your Time

The sooner you apply, the better. But that applies to years and not weeks, so don’t feel like you need to rush. If you’re not sure about the process and need a little advice, spend some more time reading through articles and guides and speaking with current policyholders.

Providing yourself with a little extra shopping time will also make it easier to compare and to find the best life insurance rates and the best payouts based on your specific budget and situation.

Source: pocketyourdollars.com

What is Permanent Life Insurance and How Much do you Need?

  • Life Insurance

Permanent life insurance is defined as a whole-life policy, one that doesn’t expire and may provide a number of benefits during the policyholder’s life and when they pass away. It’s not a specific type of insurance, as such, and is instead an umbrella term used to describe life insurance policies that are not fixed to specific terms.

Find the Right Life Insurance for You!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

Types of Permanent Life Insurance Policies

There are two types of permanent policies: Whole Life Insurance and Universal Life Insurance. Unlike term life insurance, which is fixed to a specific term, permanent insurance policies are designed to be paid for the entirety of the policyholder’s life, with a death benefit released upon their death.

Take a look at these pros and cons to see how a permanent life policy can benefit you.

Pro: Lifelong Coverage

Permanent life insurance is not limited to a fixed period of time and providing you keep meeting those monthly premiums, the death benefit will be released to your heirs when you die.

Pros: Cash Value

Permanent life insurance is often likened to a savings account and a life insurance policy combined, as it has a cash value that you can collect as you see fit. You can see the policy’s cash value during the term and withdraw as much money as you need.

What’s more, the cash value grows on a tax-deferred basis, which means the policyholder is not required to pay taxes on the money it generates.

Pro: Premium Payments Don’t Change

With whole and universal life policies, your premium payments remain the same, which means you don’t need to worry about variable life insurance rates changing from one year to the next. You should pay the same in the first year as you pay in the 20th year.

Con: It’s More Expensive

The extended coverage and extra investment options come at a greatly inflated price, as whole-life policies tend to be much more expensive than their term-life counterparts. How much you pay will depend on the amount of coverage provided, but it’s generally a lot higher than a term life policy with the same payout.

Con: It Doesn’t Account for Inflation

A lot can happen in 50 years and a death benefit that seems like a huge sum now may be worth much less in 40 or 50 years when you eventually pass away. However, it’s worth noting that your life insurance premiums will remain the same as well, so it’s all relative.

Cons: It’s Complicated

Term-life insurance is relatively simple. You pay a sum of money every month and if you die within the term, your loved ones will be given a cash sum. However, once you consider the cash value, tax-free withdrawals, potential dividends, and more, permanent insurance policies are more complicated.

Other Types of Life Insurance

There are several types of life insurance and if you’re being rejected for permanent life insurance or receive quotes that are far too high, it’s worth looking into one of these other options.

Term Life Insurance

With a term life insurance policy, you won’t be covered for your entire life, but you will receive extensive coverage for a number of years. These policies are available for less, because if the policyholder outlives the term they won’t collect the death benefit or any other payments and the life insurance company will secure all the profits.

Final Expense Life Insurance

Seniors are generally refused for term and whole-life insurance policies because the risk is too high. However, final expense life insurance can provide many of the same benefits, with a death benefit paid to your loved ones when you die. The premiums tend to be high and the payout low, but if you’re above the age of 60 this is one of the few options you have for life insurance coverage.

Final expense insurance is often used to pay for funerals, estate taxes, and debt, but there are no restrictions regarding how it can be used.

Joint Life Insurance

Joint life insurance policies are targeted at spouses seeking to provide cover for each other and their children. The options include first-to-die insurance, where the money will go to the surviving spouse; and second-to-die insurance, which pays the death benefit to beneficiaries when both applicants die.

Is Permanent Life Insurance Right for you?

If you can get your head around permanent life insurance and understand what you’re paying and what benefits it’s providing, it could be the right choice. This is especially true if you have the money to meet those payment obligations every month and want the extra asset that the cash value can provide.

However, if your insurance needs revolve entirely around protecting your loved ones, term-life insurance is probably the better option. A term life insurance policy generally offers a high payout for low premiums (when compared to whole life policies). This sum can be used to clear debt, pay off the mortgage, and set your loved ones up for life. And just as importantly, it provides you with the peace of mind that comes from knowing your nearest and dearest won’t be destitute if you die.

Older applicants may struggle to get affordable term and whole life insurance products, but that’s where final expense insurance comes in. This is a limited type of policy with a coverage amount of less than $50,000, and an average amount of less than half that—more than enough to cover funeral expenses and most types of debt.

Summary: There are Always Options Available

You’re never too young, old or sick to be considered for life insurance. 

It’s all about probabilities. Underwriters will consider all the data you provide them with and use this to calculate the likely date of your death. It sounds morbid, but when your business is death, things can get a little dark every now and then.

Imagine, for instance, that you’re a 20-year-old male with a clean bill of health and a brand-new family to look after. A life insurance company will be more than happy to provide you with term life insurance, because these products are limited to 30-years and the odds are high that you will live to be 50. Not only will they be more than happy to sign you up, but they will also offer you a good price because you’re deemed to be such a low risk.

If you opt for a permanent life insurance policy, the premiums will be higher because the death benefit payout is more likely. However, they also know there’s a good chance you will face financial difficulties during the next few decades, in which case you may stop making those payments or accept the cash value as soon as it reaches a respectable sum.

As you age, your risk increases, and the same applies for smokers and people with pre-existing medical conditions. They will still be more than happy to receive your business, it just means your options may be a little more limited and your premiums may be much higher.

So, keep searching, keep comparing, and work on improving your health to bring those premiums down.

Source: pocketyourdollars.com