Life Insurance Arlington is an important part of your financial plan. It can help protect your loved ones from the financial hardship that would result from your death, and it can also provide a source of retirement income.
Life insurance can be used to pay off debts, medical bills, funeral costs, mortgage and car loans. It can even be used to fund children’s education and other expenses.
The main purpose of life insurance is to provide a death benefit to dependants in the event of the insured’s death. The death benefit is paid out in the form of a lump sum to beneficiaries named in the policy. Beneficiaries can be any individuals or entities, including revocable or irrevocable trusts. The policyholder (also known as the insured) can also be the beneficiary, but often is not. A beneficiary must submit a death certificate to the insurance company to trigger the payout.
People purchase life insurance for many reasons, including to pay off debt, cover funeral expenses and fund children’s education. It is also a good way to supplement retirement income or provide an inheritance for loved ones. There are different types of life insurance, and a financial professional can help you choose the right policy for your needs.
When choosing a life insurance policy, you must consider the amount of coverage you need and how long you want the policy to last. Term life insurance is usually cheaper than permanent policies, and it offers a set amount of coverage for a specific period of time, such as 20, 30 or 40 years. Permanent policies, such as whole life and universal life insurance, have a built-in cash value that can be used to reduce the premium or for other purposes.
Besides determining the type of policy you need, it is important to understand how the underwriting process works. Most insurers will require a medical exam to determine your health. However, some companies offer no-exam policies that are available to those who are younger and in good health.
Premiums
Life insurance premiums are payments made to an insurer in exchange for a lump-sum death benefit that is paid to beneficiaries upon the policyholder’s death. The premiums are calculated based on the policyholder’s current age, sex and health condition. In addition, the premiums are used to cover a portion of the insurer’s operating costs.
Two major factors that influence the cost of life insurance are your age and sex. Men generally pay more than women for life insurance because they have shorter lifespans. Also, the riskier your occupation or lifestyle, the more expensive your premium will be. For example, if you work on the bomb squad or drive race cars, you may pay more for your life insurance than someone who works behind a desk.
The type of life insurance you choose will also affect the price. For instance, a term life plan typically has a lower premium for the first few years and a higher than regular whole-life premium in later years. This type of policy is ideal for people who want coverage for a set period of time but cannot afford a permanent life insurance policy.
Most insurance providers require a medical exam to assess the applicant’s health and determine their risk level. The exam usually includes a blood draw and urinalysis to check for cholesterol, glucose levels and nicotine use. The results of the medical exam can greatly affect your premium, so it’s important to be honest and accurate.
Cash value
A life insurance policy’s cash value is a savings or investment component that builds up over time. It can provide additional funds to pay premiums or for other purposes, and it can also help beneficiaries avoid selling tangible assets like a home. This added benefit can be particularly useful for high net worth individuals who want to protect their wealth and transfer it to heirs.
Many life insurance policies have a cash value component, including whole life, universal and variable life insurance. A portion of your premiums goes into a fund called the cash value, which grows at a rate set by the insurer. In addition, the cash value may be boosted by life insurance dividends paid out by the insurer. These dividends are similar to stock dividends, but can have a more immediate effect on the growth of your policy.
The earnings on the cash value are tax-deferred, but you will owe taxes on withdrawals and loans that go above your cost basis (the amount of money you’ve paid in premiums). When you die, the unused cash value is returned to the insurance company, and the beneficiaries receive the death benefit payout.
Most policies allow you to borrow against the accumulated cash value, but it is important to keep in mind that the death benefit will be permanently reduced by the amount of any loans or withdrawals you make. Additionally, you must keep the policy’s accumulated cash value above a minimum level or it may lapse.
Lapsing
A life insurance policy can lapse if the premium is not paid on time. This may be due to a change in address or banking information, or it may simply be because the policy no longer fits into one’s budget. However, a lapsed policy can have severe consequences for the beneficiaries of the deceased individual.
Fortunately, most insurers offer a grace period during which the insured can pay the outstanding premium without penalty. This period usually lasts between 30 days and six months, depending on the insurer.
If the policy lapses, the death benefit is no longer available to beneficiaries. In addition, future premiums will be higher than before. This is a big reason to avoid letting your policy lapse in the first place. Proactive measures such as setting automatic payments can help you prevent a lapse.
While it is possible to reinstate a lapsed life insurance policy, it is important to act quickly. Reinstating a lapsed policy requires the payment of past-due missed premiums with interest, as well as a new underwriting process, which may result in higher future premiums. This can be especially problematic for permanent policies, which generally increase with age and are based on health status. Nevertheless, it is always worth trying to reinstate your life insurance policy. If you are unable to do so, contact a life insurance attorney to discuss your options.
Contestable period
The contestable period of life insurance is a two-year window that allows the insurance company to investigate a claim. Typically, it will request medical records and double-check its file with the MIB Group, which most insurers use to report information about people who apply for coverage. This allows companies to detect misrep犀利士5mg resentations, including hiding hazardous occupations or risky hobbies on a policy application. The purpose of the contestability period is to penalize people who hide important details about their health and lifestyle, which can cost them higher premiums. In some cases, if the company finds that a person committed suicide during this period, it can deny the death benefit to the beneficiary.
However, the insurance provider must prove that a person was dishonest on their application in order to deny a claim. This can be difficult, especially if the misrepresentation was significant and intentional. The contestability period also helps prevent many cases of fraud and abuse, such as when people lie on their life insurance applications to procure lower premiums.
Regardless of the reason for the investigation, it is crucial to provide accurate information on your life insurance application. This will help your loved ones receive the full death benefit if you pass away during the contestability period. If the insurance provider discovers a mistake, it can retroactively increase your premiums or even deny your claim. In most cases, this type of denial is due to a serious misrepresentation, such as not disclosing a history of smoking or participating in hazardous activities.
Reinstatement
Reinstatement of life insurance is a process that allows the policyholder to resume the coverage after a lapse. This process can be complicated, however, because it requires the submission of an application and proof of financial responsibility to the insurer. Additionally, the insurer may also require a new medical examination or other documentation to show that you are eligible for reinstatement.
If you have a lapsed life insurance policy, you should contact your insurer as soon as possible to see if they will reinstate it. Typically, they will give you a grace period of around 30 days after which the policy will lapse. After this, you will need to submit a written request for reinstatement. The insurer will review the request and might require you to pay any outstanding premiums plus interest.
The insurance company will also want to know whether you have any loans taken out against the policy. If you have, you will need to repay them in order to meet the requirements of the reinstatement. You may also need to pay for a new medical exam or fill out a questionnaire to demonstrate that your health status has not changed significantly since the original policy was issued.