Life Insurance in the US

Term insurance is a type of life insurance that provides coverage for a specific period. Basically, it is a signed contract between the policyholder and an insurance company, under which the insurance company pays money to the nominees if the insured person dies during the term in exchange for the premiums paid by the policyholder. Typically, federal income tax regulations do not apply to the life insurance payout, and beneficiaries can use the amount for anything, including covering tuition fees, paying off outstanding debts or a mortgage, covering funeral costs, paying business costs or smoothly managing monthly expenses.

Term insurance policies are generally designed to offer more affordable coverage for a defined term, typically 10 or 30 years. In the United States, your insurance company may offer you a policy with a provision to continue or renew it as the policy’s end date approaches.

We at US Finance Guides help you get life insurance quotes from multiple licensed agencies. We enable you to explore policy terms and conditions and also help you answer critical questions about the policy renewal cost, age-related renewal restrictions and what your coverage options will be if the policy is non-renewable.

Types of Life Term Insurance Policies

Understanding the different types of life insurance policies can sometimes be difficult as well. Generally, life insurance policies can broadly be divided into two categories: term life insurance and permanent life insurance. While term policies are designed for a specific period of time, permanent policies are designed to provide coverage for the policyholder’s lifetime. As long as policyholders keep paying premiums on time, their cash value will not fall below a certain level.

Term Life Insurance

Term life insurance is issued for a set period of time, typically spanning one year to 30 years. The insurance company will pay the death benefit if the policyholder dies during the policy term. Otherwise, the policy will expire, and the death benefit will not be paid to the named beneficiaries. However, some insurance plans are renewable or convertible:

• Renewable: You can renew your policy for another term when the current term end date is approaching, but you may have a new premium based on your current age and state of health.
• Convertible: Many insurance agencies allow you to convert your current term policy into a permanent one without providing any evidence of your insurability. The policy is guaranteed, so it can be renewed regardless of your health status. However, your premiums may be higher due to your age.

Permanent Life Insurance

A permanent life insurance policy is simply one that does not expire. However, the most common types of this insurance policy are whole life insurance and universal life insurance.

Whole Life Insurance

Whole life is one of the most common types of permanent policies, which offers guaranteed benefits if the policyholder does not default or pays premiums on time. This policy builds cash value over time in a savings account, which may be used for borrowing or withdrawals and grows at a minimum guaranteed rate. Premiums are guaranteed and fixed, along with the death benefit.

This is an insurance policy that falls under whole life insurance, whose primary aim is to cover final expenses, such as funeral or burial costs. However, this policy includes lower death benefits.

Universal Life Insurance

Universal life insurance, often known as adjustable life insurance, is another type of permanent policy that offers more flexibility than whole life. This enables you to change the death benefit as long as you meet the qualifying criteria. There is also cash value in the policy, which earns money market interest, as with conventional universal policies. If you accumulate sufficient cash value, you are able to change your premium payments. There are two types of universal life insurance:

• Indexed universal life: The IUL accumulates its cash value depending on how the stock market index performs, e.g., NASDAQ and S&P 500. It is possible that you have a minimum interest rate that the cash value can earn, irrespective of market performance, although there is an interest rate cap as well.
• Variable universal life: Rather than earning market interest rates on the cash value, with VUL, you can decide how you are going to invest the cash value (like mutual funds, stocks and bonds). With the greatest returns comes the greatest risk. Your cash value and death benefits might even be reduced because of the poor performance of your investments. We at US Finance Guides encourage policyholders to invest carefully.

Features of Life Insurance Policies

• Premium: Premium is the monthly or annual cost you pay in exchange for policy benefits.
• Death Benefit: A death benefit is the sum of cash that your named beneficiaries get if you die while the policy is active and you paid regular premiums without default.
• Cash Value: Finally, permanent insurance policies contain cash value, which is essentially a savings account that grows over time. The cash value can either have a fixed or money market interest rate. Otherwise, the cash value will be tied to either the performance of the stock market or individual stocks and bonds.
• Riders: A rider can be added to certain policies to provide additional coverage. Some examples of riders include Accelerated Death Benefit, Accidental Death Benefit, Children’s Term, Disability, Guaranteed Insurability, Long-Term Care, No-Lapse Guarantee, Return-of-Premium, Term Conversion and Waiver of Premium.

Factors Affecting Life Insurance Cost

Life insurance can benefit your nominees with financial support after you die during the term of the policy. However, every person may have different premiums based on multiple factors. Some of them are mentioned below:

• Age: Usually, younger individuals get lower premiums because they pose lower risks to life insurance agencies, as they have a longer life expectancy. With age, an individual is exposed to several factors that may shorten their life expectancy.
• Gender: Men generally have a shorter life expectancy than women, so they have to pay higher premiums than their counterparts.
• Health: Your health condition and any ongoing illnesses can affect your premium costs. Hypertension, high cholesterol levels, cardiac diseases and diabetes are common risk factors for life insurance.
• Occupation: Jobs in industries such as construction and manufacturing are more dangerous than office jobs; therefore, they will be charged higher insurance premiums.
• Lifestyle: Dangerous hobbies like rock climbing, car racing and even being a pilot can be another factor considered when issuing life insurance policies with higher premiums due to the increased risk of getting into accidents.
• Driving record: Speeding, accidents and driving under the influence (DUIs) can be another serious factor that may raise your premium rates for your life insurance policy.
• Tobacco use: In the case of life insurance pricing, it is well known to all companies that smoking reduces life expectancy and increases the cost of premiums.
• Family health history: Having a family health history that includes severe health problems may result in increased life insurance premiums since you are likely to experience such health problems yourself.

Who Can You Name as Your Beneficiary?

Your beneficiary is the person(s) who gets the payout from your life insurance company when you pass away during the term of your policy. Many people choose one person as their beneficiary and then add a backup beneficiary also. At the same time, others name multiple beneficiaries, generally a spouse, a child or dependents or other family members.

Your Partner or Spouse

In the case that you are already married or are in a long-term relationship, it might be best to assign your spouse as your primary beneficiary. Your spouse will be able to assume joint obligations like paying off the mortgage or personal debt.

Your Children or Dependents

If you are a single parent and have kids, you could name them as your nominee on your insurance policy in the first place. This makes total sense considering that your children or dependents may be the very reason why you have decided to purchase a life insurance plan. You may want to secure their education or at least ensure that they are able to pay off all your debts.

Your Close Friends

While family members make common beneficiaries, many of the insurance policies in America allow you to add your close friends as your beneficiaries.

How Can You Change a Named Beneficiary?

Regardless of the method you choose for naming your beneficiaries, it is crucial for you to understand that you can always switch when it is necessary. The procedure to switch your beneficiary is quite simple; all you have to do is provide your insurer with the new beneficiary’s information. It is always a great idea to have some backup names in mind, since unforeseen situations can arise at any time.

When you're ready to name your nominees and want to find the right life insurance policy for you and your family, we can help. We at US Finance Guides can help you find the best term life insurance or whole life insurance plan for you in the United States.

When Do People Buy a Life Insurance Policy

No two individuals may be facing the same situation in life; some may consider buying life insurance policies at the time of their marriage or starting a family. Switching jobs where there would be no more employment insurance coverage. Others may consider purchasing life insurance policies at the time of starting a new business where a means of securing continuity is required or at the point when an individual starts planning his estate.

Though there could be many reasons for considering life insurance, what should be remembered is that now is the best time to buy life insurance. The younger you are, the easier it will be for you to pay your premium.

How to Get a Life Term Insurance Quote

Calculate the Amount You Need

There are several methods that can be employed to determine the right amount of coverage in life insurance, including the use of the multiple income rule and the life insurance calculator. However, according to the National Association of Insurance and Financial Advisors, you need to ask yourself some questions such as:

• What are your beneficiaries?
• How long will they need financial aid?
• Do they have any disabilities?
• What are your debts/savings?
• Will you pay for their education/retirement?

Select a Policy Type

Select a type of policy that best suits your needs:

• Term: Term life insurance is one of the cheapest forms of life insurance since it is offered for a set period of time, generally ranging between one and 30 years. The policyholder's beneficiaries will get the death benefit only in case of the policyholder’s death within the specified term.
• Whole: One of the most popular forms of a permanent policy, whole life insurance delivers you the guarantee of death benefits throughout your entire life, as long as you make timely premium payments. This policy also has an additional feature known as cash value, which increases at a fixed rate of interest. You can take a loan and make withdrawals from the cash value account. However, the death benefit might get reduced owing to any outstanding loans and withdrawals. Moreover, the policyholders of some firms may even earn dividends from their policies.
• Final expense coverage: One of the cheapest forms of whole life insurance is final expense insurance, which is supposed to cover only the cost of your last days, which include burial and funeral. You won’t have to go through a medical test before getting this policy since final expense insurance can be a good choice for those with long-term diseases and health problems.
• Universal: Universal life insurance is another form of life insurance that lets you make modifications to your premium and death benefit in the future.

Compare Companies

You can get quotes by comparing multiple options from our verified partners either by applying through the internet or by visiting physical offices in person. While comparing the various companies, make sure that you consider all the following elements when requesting the quotes, such as policy type, term length (if applicable), death benefit amount and riders (if applicable).