Life Insurance Greenville can help your loved ones avoid financial loss and hardship after death. Learn the basics of how it works and why it’s important.

Healthier people tend to die younger, so life insurance companies charge them less (on average). Some policies have specific exclusions, such as suicide clauses.

A life insurance policy is a legal contract that transfers the death benefit proceeds to your beneficiaries upon death. There are several different types of policies, including term and whole life insurance, as well as universal or variable life. A financial professional can help you decide which policy is right for your needs and budget.

The insurer is the company that sells and manages a life insurance policy. The policyholder is the person or entity that owns (or holds) the policy. The insured is the person whose life is covered by the policy. The beneficiary is the person or entity who will receive the death benefit. The beneficiary can be a single person or an aggregate of many people and entities, such as children or charities. The owner can change the beneficiary at any time by giving written notice to the insurance company. However, if the policy is irrevocable, a beneficiary change may not be possible.

Unlike other forms of insurance, life insurance can provide a death benefit to your family regardless of the cause of your death. Some life insurance policies also offer living benefits, which allow you to access a portion of your death benefit while you are still alive.

The primary purpose of life insurance is to cover unavoidable expenses that your family will face in the event of your death. Other purposes include replacing lost income, paying off a mortgage or debt, and providing funds for your children’s education. The death benefit is generally not subject to taxes, but your policy may have other provisions that affect this. For example, some policies have specific exclusions such as suicide and fraud, while others have a contestability period that allows the insurance company to review your application for the policy to determine whether or not it should be paid.

Benefits

Generally, life insurance pays a lump sum to the beneficiaries when the insured dies. It can help families pay for funeral expenses, other final costs, debts, childcare, and college tuition. It can also help supplement income to allow a partner or children to carry on working and living comfortably after the death of the policyholder.

It’s important to review your needs on a regular basis. If you have significant financial goals, such as funding your children’s education or purchasing a home, you may need to increase the amount of coverage. It’s also wise to reevaluate your insurance needs after major events, such as divorce, marriage, the birth or adoption of a child, and big purchases, such as a car or a house.

Your premiums are based on the amount of coverage you choose and your current health. Generally, healthier people pay less for their life insurance policies. Women, non-smokers, and people without a history of complex medical conditions tend to get better rates. Life insurance also requires a medical exam to assess your health, weight, blood pressure, cholesterol and other key factors.

Some life insurance policies offer riders that provide additional protections. For example, an accidental death rider provides a higher payout in the event of an accident. Other riders may cover specific events, such as terminal illness or chronic disease.

The benefits of life insurance are tax-free for your beneficiaries. However, your premiums are not tax-deductible. You can sometimes access the cash value of a whole life policy during your lifetime, but this will reduce your death benefit and future dividends. If you need cash, some companies will let you borrow against the value of your policy at a cost.

Premiums

A premium is the financial fuel that powers your policy, ensuring that it remains active and your beneficiaries are safeguarded. Whether you select a term policy with a set duration or a permanent policy, the amount of your premium is determined by your insurance company based on the level of risk they are taking with your policy.

The higher your risk, the more your premium will be. During the underwriting process, your life insurance company evaluates a number of different factors that impact your premium. These include your age, gender, health, occupation and lifestyle. Some lifestyle choices such as smoking or engaging in dangerous hobbies can also increase your premium, due to the increased risk associated with these activities.

Your life insurance policy will have a specific death benefit, or face value, that your beneficiary will receive upon your death. It is important to consider this amount when determining how much coverage you need. It is also important to understand that your financial obligations will change over time, so it is recommended that you update your coverage as needed.

Depending on your needs, you may want to use an online calculator to help determine how much life insurance coverage you need. These calculators take a variety of factors into account, including your family’s current financial obligations and future security needs.

You can also opt for a whole life insurance policy, which provides protection for your entire lifetime as long as you pay the premium. Typically, these policies have higher premiums than term life insurance and offer the added benefit of a cash value component that you can borrow against or withdraw from during your lifetime.

Riders

The insurance industry often offers a variety of riders to customize policies. These are available for a cost on top of the premiums that an insured party pays. Some of these include guaranteed insurability, child term, family income benefit, long-term care, return of premium and accelerated death benefits.

The guaranteed insurability rider allows you to convert your term policy into a permanent policy without having to undergo additional underwriting. This is useful for people who fear that they may be unable to get a new life insurance policy if they have health issues in the future.

Similarly, the return of premium rider lets you withdraw your entire cash value from the life insurance policy in certain cases (like terminal illness) and still receive the death benefit. This is typically only available with whole life insurance policies.

Another common rider is the family income benefit, which adjusts how the death benefit will be paid out to your family if you die during the duration of your policy. It pays out a portion of the death benefit on a monthly basis, similar to an income, rather than as one lump sum.

The costs of these different riders vary from one company to the next. However, it is worth discussing them with your insurance agent before deciding whether they are right for you. For instance, some of these riders can have time limitations and may require that you meet specific conditions to qualify for them. For this reason, it is always best to speak with a financial advisor or licensed life insurance agent who can walk you through the different options and help you evaluate whether they are worth the extra cost.

Lapsing a policy

Life insurance provides security and peace of mind to policyholders’ loved ones. However, life insurance policies can lapse if the policyholder fails to pay premiums. Lapsing a policy can have serious consequences and will make the death benefits paid by the insurer invalid.

Most insurers allow a grace period, usually 30 days after the premium due date, to make up for missed payments. However, if the policyholder fails to pay the missing premium within this grace period, the policy will lapse. If a lapsed policy is revived, the insurer will typically charge a fee to cover any missed interest and may impose new underwriting requirements, such as requiring a medical exam or providing recent health records.

The primary cause of life insurance lapses is non-payment of premiums. This can be caused by forgetfulness, financial difficulties, or changes to the policyholder’s lifestyle that make it difficult to budget for the required monthly payment. In some cases, a lapse can be the result of an error made by the life insurance company, such as sending the wrong statement or making an administrative error that results in missed notifications about late payments.

Lapsed policies can be revived, but it’s important to act quickly after the lapse. The process to reinstate a policy is similar to the underwriting process when obtaining a new life insurance policy and may require re-examination of the applicant’s health status, as well as a requirement to repay any outstanding loans against the lapsed policy. It’s also crucial to disclose any previous lapses when applying for life insurance, as it could impact future coverage and premiums. To avoid a lapse, it’s advisable to set up automatic payments, keep up-to-date contact information with the insurer, and to review your coverage on a regular basis.