Introduction
In the U.S., life insurance is a big business. How big? Americans purchased about $3.3 trillion of new life insurance coverage in 2020, according to the American Council of Life Insurers (ACLI). That brings the total amount of life insurance coverage in the U.S. to about $20.4 trillion, based on ACLI data, and there are nearly 750 life insurance companies in operation domestically.
For more information, visit our guide to the Best Life Insurance Companies of 2022. 카지노사이트
What Is Life Insurance?
Life insurance policies are designed to provide financial support to designated family members or loved ones, called beneficiaries, in the event of the insured person’s death. This payout, known as a death benefit, can be used to meet financial obligations (e.g., mortgage payments or college tuition), cover funeral and related expenses, or make up for lost income. Some policy types accumulate cash value that can be borrowed against or withdrawn under certain circumstances while the insured person is still alive.
How Many Types of Life Insurance Are There?
Term life is a temporary policy, while permanent life insurance is generally valid for your life span. There are pros and cons to both, and understanding the difference can help you select the best one for your needs. In addition, many life insurance companies sell “riders,” supplemental policies to cover specific events or needs, such as accidental death, end-of-life expenses, or long-term care.
Term Life Insurance
Term life insurance provides coverage for a defined period of time, or term, ranging from one to 40 years or to a specific age (commonly 65). The death benefit, or payout amount, is guaranteed as long as the policy is current. Once the term expires so do any associated benefits. In general, term policy premiums are much more affordable than permanent life coverage. Unlike permanent life insurance, however, the policy has no actual cash value or investment component. Premiums for term policies may remain fixed for the entire term or increase over time.
There are two kinds of term life insurance:
Level-term policies pay the same death benefit amount should the insured die at any point during which the term is in effect. This is by far the most popular kind of term life insurance, according to the Insurance Information Institute (III).
Decreasing-term policies feature a death benefit that diminishes over time.
Some term life insurance policies are renewable, meaning the insured can extend their coverage for an additional term when the initial term expires, even if they would not otherwise qualify for a policy. In addition, certain policies may be convertible to permanent life insurance. 안전한카지노사이트
To learn more, visit our guide to term life insurance.
Permanent Life Insurance
Permanent life insurance provides lifetime coverage, and policies will remain in effect as long as premiums are paid. Policy premiums generally do not change, but they are far more expensive than term life insurance because they last for a lifetime and accumulate a cash value in addition to a death benefit. Many permanent life insurance policies allow you to tap into this cash value while you’re alive.
Primary types of permanent life insurance coverage include:
Whole life insurance policies are the most common type of permanent life insurance, according to the III. This kind of policy offers level premiums and is guaranteed to earn a minimum rate of return. Whole life insurance may also pay dividends that can be applied toward premium payments, reinvested, or withdrawn as income.
Universal life insurance policies are similar to whole life policies in that they build cash value over time. Unlike whole life insurance, the premiums, death benefits, and rate of return can fluctuate during one’s lifetime.
Guaranteed universal life insurance offers a guaranteed rate of return as long as the premiums are paid, providing some stability for financial planning. Such policies may accumulate cash value over time, typically at a more conservative rate of return than other types of universal life insurance.
Indexed universal life insurance links its rate of return to a market index, such as the S&P 500. Policies usually have a guaranteed “floor,” or minimum rate of return, but the investment component offers the opportunity for greater returns based on market performance.
Variable universal life insurance is similar to an indexed policy in that the rate of return is linked to financial market performance. However, the National Association of Insurance Commissioners (NAIC) points out that interest accrual is not guaranteed and in some cases can be negative, depending on market performance.
Final Expense Insurance
Also referred to as burial or funeral insurance, final expense coverage pays a cash benefit – no more than $25,000 in many cases – that can be used to pay for end-of-life expenses, such as funeral costs or any outstanding debts.
Life Insurance Riders and Add-ons
Depending on the kind of life insurance policy you have, you may be able to amend it by purchasing supplemental coverage known as a rider or add-on. Common riders include:
Accidental death benefit. This provides an additional death benefit should the insured die before a certain age. Illness-related fatalities are often excluded.
Accelerated death benefit. This rider allows the covered individual to collect a percentage of their death benefits while still alive in the event that they are diagnosed with a terminal illness.
Child rider. This rider acts as a life insurance policy for your child and will provide a death benefit if they pass away while your policy is active.
Term conversion rider. This allows you to convert a term life policy to a permanent life insurance policy.
Waiver of premium. With this add-on, a person can maintain coverage, free of premium payment obligations, in the event that they become unable to work due to a disability. 카지노사이트 추천
Learn more about how life insurance works.
What Are the Best Life Insurance Companies?
Haven Life is a digital insurance company and is the top term life insurance company, according to our 2022 ratings. This online-only insurer only sells term policies, and a medical exam may not be required for some applicants. It should be noted that Haven Life policies are issued by MassMutual, which also makes our ratings, or by one of its subsidiaries.
New York Life and Northwestern Mutual tie for the No. 1 spot in our Best Whole Life Insurance Companies of 2022 rating. Both companies offer an array of permanent insurance policies that accumulate cash value over time as well as term life insurance products.
What Are the Cheapest Life Insurance Companies?
Banner Life is the cheapest life insurance company in our ratings, offering both term and universal life policies. Based on our data, the average monthly premium for a 35-year-old woman with average health is $46.63 for a $1 million, 20-year term life insurance policy. In addition, Banner Life is one of the few insurers in our rating to offer terms of 35 and 40 years.
AIG is No. 2 in our rating of cheapest life insurance companies. The company offers term life, whole life, universal life, variable universal life, and indexed universal life policies. A 35-year-old woman with average health can expect to pay a monthly premium of $46.91, on average, for a $1 million, 20-year term life insurance policy.
For more information, visit our guide to the Cheapest Life Insurance Companies of 2022.
FAQ
Should I buy life insurance?
Before you buy a life insurance policy, consider whether you really need it. Life insurance is designed to provide a financial cushion for your dependents after you die, although it also can be used to keep a family business going or support a nonprofit organization of your choosing. If none of these rationales seem relevant to your estate planning needs, you may be better off investing your money elsewhere.
For more information on buying life insurance, visit our guide to life insurance quotes.
Is life insurance tax-deductible?
Life insurance premiums are considered personal expenses and are not tax-deductible. The IRS does not consider life insurance payments to beneficiaries to be taxable income, meaning they do not have to be reported as gross income. However, any interest that a life insurance policy may accrue is considered taxable income and should be reported on your filing. If you’ve received a life insurance death benefit and are unsure of your tax obligations, contact a financial professional.
Can you have more than one life insurance policy?
Yes, you can buy more than one life insurance policy, although your insurer may cap the total coverage amount you qualify for.
Can I get life insurance if I have a pre-existing health condition?
Yes, a life insurance company can deny your application due to a pre-existing condition, but that doesn’t mean you won’t be able to find coverage if you suffer from health problems. Each life insurance company approaches pre-existing conditions differently, and though you might be denied coverage by one insurer, another may approve your policy. However, keep in mind that a pre-existing condition typically leads to higher premiums.
If you have a pre-existing health condition and are shopping for life insurance, you may want to consider a guaranteed issue life insurance policy. Guaranteed issue policies do not require a medical exam or a health questionnaire, making it a popular option for individuals with medical issues or who are unable to get coverage due to their age.
Do I need to take a medical exam in order to buy life insurance?
No, you don’t always need to take a medical exam to get life insurance. If you prefer to avoid a medical exam, consider one of the following policies:
Simplified issue: Does not require a medical exam or lab work, but applicants typically must answer a health questionnaire.
Guaranteed issue: Does not require a medical exam, lab work, or health questionnaire.
For more information, visit our guide to no-exam life insurance.
How are life insurance rates determined?
Insurance companies use a number of factors during underwriting, a process used to assess an applicant’s degree of risk. These factors include:
Age
Gender
Overall health (e.g., weight, blood pressure, cholesterol levels)
Family medical history
Smoking
Occupation
The policy type, duration (if term life), coverage amount, and any riders you choose will also affect your life insurance premium.
What is a return of premium?
A “return of premium” means the policyholder will receive a cash payout if the insured person is still living after the level term has expired. The payout amount is typically equal to the base premium amount and, in some cases, the return-benefit premium as well. The Insurance Information Institute cautions that return-of-premium term life insurance tends to be “significantly higher” than term policies without this option.
Why You Can Trust Us: 25 Life Insurance Companies Researched
At U.S. News & World Report, we rank the Best Hospitals, Best Colleges, and Best Cars to guide readers through some of life’s most complicated decisions. Our 360 Reviews team draws on this same unbiased approach to rate the products that you use every day. To build our ratings, we researched more than 25 life insurance companies and agencies and analyzed 14 third-party review sources. Our 360 Reviews team does not take samples, gifts, or loans of products or services we review. All sample products provided for review are donated after review. In addition, we maintain a separate business team that has no influence over our methodology or recommendations.