Welcome to Garv Financial my name is Garv Pullap. I am going to cover how does Life Insurance work, what is Life Insurance? The main purpose of Life Insurance is to provide risks management. What is Risks Management? Risks Management is obtaining insurance that hope you manage certain types of risks. In this case, this Life Insurance, Life Insurance is not meant to protect the insured. But the beneficiary if something happens to you, Little Timmy can still go to college. The auto loan get’s paid off; the mortgage is one to pay, the funeral expenses are taking care off along with other expenses. The financial burden is taking off to shoulders of your love ones.
What are the two main types of Life Insurance? Term Insurance or Temporary Insurance and number two; Permanent Insurance such as whole life Insurance, Universal Life Insurance, Variable Life Insurance and Variable Universal Life Insurance. And I will cover each of these Life Insurance policies Term, Permanent in future tutorials in more detail. Term Life Insurance is exactly what it says, Temporary for a certain term. The most common terms are 10 years, 15 years or 20 years but they are some policies that are offer for 30 years. Term Insurance policies maintain level premiums, meaning that your monthly premium doesn’t increase and stays flat for the length of your term insurance policy. So, if you’ve want your family protected you better expire while the policy is active. On the first day after the term expires your benefits expire. According insurance companies there statics only 3% of term policies are ever paid out. Term policy can be very lucrative for insurance companies.
Permanent insurance, is exactly what that’s means permanent. As long as you keep making those monthly premiums your life insurance coverage is maintain permanently. These types of insurances are also very lucrative for insurance companies. Unlike term insurance, permanent policies have cash value as part of the premium. Part of your premium goals towards cash value account but didn’t your policy that accumulates over time. As I mentioned earlier, some examples of permanent insurance are whole life insurance, universal life insurance, variable life insurance and variable universal life insurance.
Accessing Life Insurance, there are two ways to get life insurance coverage, thru work and thru and independent policy. Group life insurance thru work, get life insurance through your work if it is offered life insurance this offer along with health insurance benefits majority of the time. Group life insurance is the cheapest way to get life insurance coverage, usually free of costs at 1 to 2 times your pay. As you both by more, by paying the premium you can buy more by paying the premium which is deductive from your employee each check. As a financial adviser, the most I saw being offered was to one of my clients at six times there pay. Of course you have to pay extra for the coverage anything above the insurance coverage which is offered at no costs to you. However the extra coverage may require medical underwriting but when you receive the free coverage it requires no underwriting. And in some cases no underwriting is also required for any extra coverage as well. And of course if you leave your job the life insurance benefits end not jus like your health insurance benefits the life insurance benefits are not portable.
Independent life insurance, independent life insurance costs vary that means that there are several factors that cause each individual policy to have different premiums. When you get in independent personal life insurance policy it does require medical underwriting. The insurance companies were requiring you to have medical exams and they will review your medical records. There are multiple options available to you as a consumer for independent life insurance policies. And remember, if you do get permitted policy it does have a cash value unlike term insurance. There are factors that determine cost of a life insurance these are the basic factors that are probably the most important factors in determining life insurance costs. The monthly premium that you pay for the 10 year of the policy, firstly, what is the age of the insured?
The older you are the more expensive of the policy. For example younger people are expected to live longer so there policies are cheaper. Secondly, the sex of the insured male or female, thirdly medical underwriting results the medical exam along with your medical history determine the premium amount as well and this is probably the most important component of underwriting for an insurance company in determining your premium as well. The length of your term and insurance policy determines your premium as well for example; premiums for a 10 year term policy are less than for 20 year term. Your occupation, what you do for living determines your premium if you are police officer your premium is going to be higher than for an accountant this is due to the risks associated with the occupation.
Your personal life activities, such as sky diving, riding a motorcycle, bandy jumping and other activities can lead to higher premium. Your personal habits such as smoking, drinking or illegal drug use can lead to higher insurance premium. Lastly, the type of insurance you choose if you choose a term or a permanent insurance it can lead to a variance and insurance premiums. Historically term insurance is cheaper than permanent insurance. Benefits of life insurance, the benefits of life insurance are for the beneficiaries not the insured the death benefit provides for various expenses that can burden your love ones after your gone if you don’t have insurance. So, if you do have insurance those death benefits can really help your love ones. Of course that the amount of the death benefits is also important, your love ones get tax free inheritance. The death benefit is tax free; you can leave your benefit to charities as well. Additionally for some it can be a great tool for State planning. My name is Garv Pullap, thanks for watching the tutorial, how does life insurance work.
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