Life Insurance Review & FAQ
General Information about Life Insurance
Should I get Life Insurance?
How much coverage do I need?
Life Insurance Catches
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General Life Insurance Information
Life insurance is paid for in monthly or annual fees called
"premiums" and then paid out when the person dies. The advantage
of life insurance is the children can pay for it with money
you give them and then when the person dies the money paid
out by the life insurance company is free estate taxes. The
life insurance company makes a profit by computing your premiums
based how long they expect you to live. If you live as long
as they expect you to (or longer) then the amount of money
the your heirs collect from the life insurance will be less
than if you had invested the premiums yourself (instead of
paying them to the insurance company). The only way to win
(make a profit) with life insurance is to die sooner than
the life insurance company expects you to die. If you get
into trouble and really need the money, you can cash in your
life insurance and get some or all of the money back that
you paid in as premiums (depending on how long you've had
the policy).
Should I get Life Insurance?
This is a question everyone has to ask. Is life insurance worth it for me? Life
Insurance can save you money on estate taxes if the policy
is owned by your heirs, but if you live longer than the insurance
company expect you may end up getting less from the insurance
than if you had invested the premium money yourself. A life
insurance alternative is to set-up a bank account which pays
interest into which you deposit money that you would have
used to pay life insurance premiums. When you die that
money will go to pay your burial expenses and to cover inheritance
tax. You could just deposit a monthly amount into it instead
of paying a monthly premium. If you think you would skip putting
in the money some months because you did not feel like it
or you would take the money out and spend it on something
because you could not resist the temptation life insurance
might be a good thing for you because it would take away the
temptation.
How much coverage do I need?
You should get enough coverage
to where burial expenses are covered, and if most of your money is in
things like your house and your land you would also want to make sure
it can cover your inheritance taxes. That way your children do not have
to sell your land at cheap prices to cover the inheritance taxes causing
them to lose part of their inheritance to some person ripping
them off by paying only a fraction of the land's true worth. Inheritance
tax can be up to 50% in some areas so be sure to contact your local
government to find out how much it is where you live. Most officials
recommended 10X your annual income plus any financial or 
business obligations
you may have such as mortgage payments to protect your spouse and children.
Life Insurance Catches
There can be several catches when you sign up for a life insurance plan.
You should make sure you notice if your plan has them if you did not
want them to be there. One is if your life insurance is paid out no
matter how you die (natural, car accident, etc) or if it is only paid
out if you die an unnatural death (like in a car accident). The other
is if the life insurance company can change your premiums after you
reach a certain, if you get a certain illness, or interest rates go
down.
