Life and health insurance
Everyday, in the fast moving world, stress and insecurities are incresing rapidly. And thus, we feel the need to secure our lives not only for present but also for future. Thats when the concept of life and health Insurance comes in. And with this article we will try to answer the basic questions that mostly everybody has before approaching an Insurance Company.
At first we will talk about Life Insurance. What is life and health Insurance is a type of insurance. As in all insurance, the insured transfers a risk to the insurer, receiving a policy and paying a premium in exchange. The risk assumed by the insurer is the risk of death of the insured.
After understanding the concept of life and health Insurance,often the next question that strikes the mind is...Why should I buy life insurance
Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations:
1)Replace income for dependents-If people depend on your income, life insurance can replace that income for them if you die. The most commonly recognized case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially. Life and health Insurance to replace your income can be especially useful if the government- or employer-sponsored benefits of your surviving spouse or domestic partner will be reduced after your death.
2)Pay final expenses-Life insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.
3)Create an inheritance for your heirs-Even if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
4)Pay federal death taxes and state death taxes-Life insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance.
5)Make significant charitable contributions-By making a charity the beneficiary of your life insurance, you can make a much larger contribution than if you donated the cash equivalent of the policys premiums.
6)Create a source of savings-Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owners request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of forced savings plan. Furthermore, the interest credited is tax deferred.
What really is the concern for most is...How much life insurance do I need
In most cases, if you have no dependents and have enough money to pay your final expenses, you dont need any life insurance.
However, if you want to create an inheritance or make a charitable contribution, you should buy enough life insurance to achieve those goals.
If you have dependents, you should buy enough life insurance so that, when combined with other sources of income, it will replace the income you now generate for them, plus enough to offset any additional expenses they will incur replacing services you currently provide (for example, if you do the taxes for your family, the survivors might have to hire a professional tax preparer). Also, your family might need extra money to make some changes after you die. For example, they may want to relocate, or your spouse may need to go back to school to be in a better position to help support the family.
Many might not know but there are many types of Life Insurance.So what are the principal types of Life Insurance
There are two major types of life insuranceTerm and Whole Life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, about 6.4 million individual life insurance policies bought were term and about 7.1 million were whole life.
Term
Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions.
There are two basic types of term life insurance policieslevel term and decreasing term.
Level term means that the death benefit stays the same throughout the duration of the policy.
Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policys term.
In 2003, virtually all (97 percent) of the term life insurance bought was level term.
Whole Life/Permanent
Whole life or permanent insurance pays a death benefit whenever you dieeven if you live to 100! There are three major types of whole life or permanent life insurancetraditional whole life, universal life, and variable universal life, and there are variations within each type.
In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So they keep the premium level by charging a premium that, in the early years, is higher than whats needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.
By law, when these overpayments reach a certain amount, they must be available to the policy owner as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.
In the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life productuniversal life insurance and variable universal life insurance.
Finalyy after understanding so much about Life Insurance we are finally left with one question...How should I choose what type of life insurance to buy
Well you should consider term life insurance if:You need life insurance for a specific period of time. Term life insurance enables you to match the length of the term policy to the length of the need. For example, if you have young children and want to ensure that there will be funds to pay for their college education, you might buy 20-year term life insurance. Or if you want the insurance to repay a debt that will be paid off in a specified time period, buy a term policy for that period.
You need a large amount of life insurance, but have a limited budget. In general, this type of insurance pays only if you die during the term of the policy, so the rate per thousand of death benefit is lower than for permanent forms of life insurance. If you are still alive at the end of the term, coverage stops unless the policy is renewed. Unlike permanent insurance, you will not build equity in the form of cash savings.
If you think your financial needs may change, you may also want to look into convertible term policies. These allow you to convert to permanent insurance without a medical examination in exchange for higher premiums.
Keep in mind that premiums are lowest when you are young and increase upon renewal as you age. Some term insurance policies can be renewed when the policy ends, but the premium will generally increase. Some policies require a medical examination at renewal to qualify for the lowest rates.
You should consider permanent life insurance if:You need life insurance for as long as you live. A permanent policy pays a death benefit whether you die tomorrow or live to be 100.
You want to accumulate a savings element that will grow on a tax-deferred basis and could be a source of borrowed funds for a variety of purposes. The savings element can be used to pay premiums to keep the life insurance in force if you cant pay them otherwise, or it can be used for any other purpose you choose. You can borrow these funds even if your credit is shaky. The death benefit is collateral for the loan, and if you die before its repaid, the insurance company collects what is due the company before determining whats goes to your beneficiary.
Keep in mind that premiums for permanent policies are generally higher than for term insurance. However, the premium in a permanent policy remains the same no matter how old you are, while term can go up substantially every time you renew it.
There are a number of different types of permanent insurance policies, such as whole (ordinary) life, universal life, variable life, and variable/universal life.
There is something that many of us dont know but its true that you can save money on Insurance...Surprised!!! dont be here's how you can save money on life insurance...
There are many ways to save money when buying life insurance, but they dont always entail paying a lower premium immediately. As your top priority, look for a policy that meets your needs. Buying the wrong benefits for a low premium is a waste, not a saving. Beyond that, here are some ways to maximize your life insurance dollars.
Before you buy-
Once youve determined what type of life insurance product to buy:Focus on financially sound companies.
Dozens of companies sell life insurance. Limit yourself to companies with high ratings from two or more independent rating agencies. A low premium from a shaky company isnt a good buy.
Shop around to get a sense of the premium youre likely to pay.
Quote services on the Internet may serve this purpose, or you can ask an agent or broker to get you a premium estimate.
As part of this research, determine which rate class youll fit into. Most companies that sell individual life insurance have several different price classesusually called preferred (non-tobacco), standard (non-tobacco), preferred (tobacco), and standard (tobacco). A small percentage of people have health conditions or histories that disqualify them for even standard rates. Many in this group will be offered insurance at impaired risk or nonstandard rates.
Look into group insurance-Consider participating in your employer-sponsored life insurance program, even if you have to contribute to it financially. Employers often subsidize their group insurance costs, so it can be less expensive than individual life insurance. You might obtain coverage up to a certain level without providing evidence of good health, an advantage for some people. Youll probably pay premiums through payroll deduction, which can be a nice convenience. However, make sure to compare group and individual rates, as depending on your age and health status, group insurance may or may not provide a savings. In comparing group to individual life insurance, remember that if you have over $50,000 of group life insurance, IRS tables determine how much it costs to provide the amount over $50,000 and charges you taxable income for that cost.
Take care of yourself-Find out into which rate class youll be grouped and, if necessary, consider making some lifestyle changesdont smoke, maintain a healthy weight and exercise regularlyto qualify for a more favorable rate class.
When you're ready to buy
Shop around to get a good rate-Life insurance is a very competitive business, and youll find differences of hundreds of dollars (for annual premiums) even among financially strong companies for essentially the same policy.
Consider the net cost index-How can you compare two policies, one with premiums that start lower than the other but later are higher than the other Or one with low premiums and a low cash value, the other with higher premiums and a higher cash value Use a net cost indexa standard method for collapsing these variables into one number. The lower the number, the better, but ignore small differences (since the indexes are approximations based on assumptions, small differences might not signal true differences in values). The agent or broker with whom youre dealing, or the company from which youre considering buying a policy, will provide these index numbers.
Be aware of premium discounts for particular amounts of insurance-Most companies offer rate discounts for specified insurance amounts. For example, you might actually pay a smaller premium for $250,000 of life insurance than for $200,000, or for $500,000 of life insurance than for $450,000, because a discount kicks in at the higher insurance amount.
Beware of fractional premiums-Typically, you can pay your life insurance premium once a year, once every half-year, once a quarter, or once a month. Although paying quarterly or monthly might seem to be easier to fit into your budget, some companies levy high charges for paying premiums frequently. Others levy quite small charges to do this. If a company levies high charges for paying more frequently, try budgeting so that you can pay your premium only once or twice a year.
If youre buying a term policy, look for renewal guarantees-A renewal guarantee gives you the right to start a new term after the current one ends, paying a higher premium based on your current age, but without requiring you to undergo a new health exam or submit any other evidence of insurability. Without the guarantee, youd have to shop for life insurance all over again, and if your health has deteriorated, you might have to pay much more or not get it at all.
After exploring every aspect of Life Insurance it's time to know information about one more important Insurance...Health Insurance.Like Life Insurance, Health Insurance is also a kind of Insurance covering medical bills incurred because of sickness or accident.
Many think that there is only one kind of Health Insurance, is that trueIf no then what kinds of health insurance are there
There are essentially two kinds of heath insurance: Fee-for-Service and Managed Care. Although these plans differ, they both cover an array of medical, surgical and hospital expenses. Most cover prescription drugs and some also offer dental coverage.
Fee-for-Service
These plans generally assume that the medical professional will be paid a fee for each service provided to the patient. Patients are seen by a doctor of their choice and the claim is filed by either the medical provider or the patient.
Managed Care
More than half of all Americans have some kind of managed-care plan. Various plans work differently and can include: health maintenance organizations (HM0s), preferred provider organizations (PPOs) and point-of-service (POS) plans. These plans provide comprehensive health services to their members and offer financial incentives to patients who use the providers in the plan.
So ones we have known different types of Health Insurance what matters is how do we pick a health plan
If your employer gives you a choice of plans or you need to purchase your own coverage, it is crucial that you understand your health insurance choices and pick the insurance that is best for you and your family.
Here are some questions you should ask yourself when choosing a health insurance plan:
1)How affordable is the cost of care
2)What is the monthly premium I will have to pay
3)Should I try to insure most of my medical expenses or just the large ones
4)What deductibles will I have to pay out-of-pocket before insurance starts to reimburse me
5)After Ive met my deductible, what percentage of my medical expenses are reimbursed
6)How much less am I reimbursed if I use doctors outside the insurance companys network
7)Does the insurance plan cover the services I am likely to use
8)Are the doctors, hospitals, laboratories and other medical providers that I use in the insurance companys network
9)If I want to use a doctor outside the network, will the plan permit it
10)How easily can I change primary-care physicians if I want to
11)Do I need to get permission before I see a medical specialist
12)What are the procedures for getting care and being reimbursed in an emergency situation, both at home or out of town
13)If I have a preexisting medical condition, will the plan cover it
14)If I have a chronic condition such as asthma, cancer, AIDS or alcoholism, how will the plan treat it
15)Are the prescription medicines that I use covered by the plan
16)Does the plan reimburse alternative medical therapies such as acupuncture or chiropractic treatment
17)Does the plan cover the costs of delivering a baby
18)What is the quality of the insurance plan Im looking at
19)How have independent government and non-government organizations rated the plan For example, the National Committee for Quality Assurance issues a Consumer Assessment of Health Plans (CAHPS) report for every medical plan and facility.
20)What kind of accreditation has the plan received from groups such as NCQA or the Joint Commission on Accreditation of Healthcare Organizations (JCAHO)
21)How many patient complaints were filed against the plan last year and how many were upheld by state regulatory agencies like the state insurance commission or the state medical licensing board
22)How many members drop out of the plan each year State insurance departments keep track of disenrollment rates.
23)Do the doctors, pharmacies and other services in the plans offer convenient times and locations
24)Does the plan pay for preventive health care such as diet and exercise advice, immunizations and health screenings
25)What do my friends and colleagues say about their experiences with the plan
26)What does my doctor say about his or her experience with the plan
Lastly something we all definitely want to know...Can we buy an individual policy
Well the answer to this question is Yes. If you are unemployed, self-employed, or decide to return to school you may want to buy an individual health insurance policy.
Here are a number of options that you may consider:
Ask your insurance company if you can convert its group policy to an individual policy. You will pay a higher rate than you did before and your benefits may be limited, but the terms will still probably be better than if you buy your own policy.
If you are married, see if your spouses employer will add you to its group plan.
Try to join a group health plan through a trade association or alumni group or professional association may offer reasonable rates. If you are over age 50, you can join the American Association of Retired Persons (AARP), which offers an extensive plan. Even some credit card companies offer health insurance coverage.
As a last resort, you can buy an individual policy. The rates will be high and coverage limited, but it is important that you be protected against financial catastrophe if you or your family are hit with a major illness or injury. If you are self-employed, most of the health insurance premium will be tax-deductible.
Also I have seen many people getting bothered with this one question...If I change jobs or become unemployed, can I bring my coverage with me
Well if you switch employers, you have the right to carry your group health insurance coverage with you to a new job for up to 18 months under the Consolidated Omnibus Budget Reconciliation Act (COBRA).
You must pay the full premium, but at group rates that are far cheaper than the individual rates you would pay for similar coverage. Health insurance under COBRA is available if you are in the following situations:
You leave a company and become unemployed or self-employed for up to 18 months.
You are a widow or widower or child of an employee who dies while working for the same company for three years or more.
You are the divorced spouse or child of an employee who has left the company he or she was employed at for at least three years.
You are the child of an employee who left a job and have not yet reached age 23.
With this we come to an end of the discussion of Life and Health Insurance.Hope we were able to answer most of your questions and queries.At the end we would like to say that life is the most beautiful gift so secure it and cherish forever...
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