The total funeral cost in the US ranges from $5,000 to $20,000. But families suffer the biggest material losses when they pay off the loans of the deceased. Therefore, it is very important when concluding a contract to correctly determine the life insurance amount.
The easiest way to do this is to add up the one-time costs, calculate the amount of insurance invested at 5%. For example, if your one-time expenses are $200,000 and your spouse wishes to receive $25,000 in additional income, your total coverage would be $700,000. This amount includes $200,000 in expenses and $500,000 invested at 5% to generate an annual return.
Insurance is usually divided into two categories: term insurance and permanent insurance.
Term insurance is the least expensive type of insurance and is preferred by young people and many financial planners. Term insurance is available with an annual renewable term (ART) or fixed payment for 5, 10, 15 years or longer.
Since term insurance does not include any investment, it allows purchase the policy with the greatest potential at the lowest cost. Due to intense competition in the insurance industry, prices for fixed-term and fixed-rate policies have declined in recent years.
Permanent insurance includes several types. Endowment insurance is the traditional favorite, but there is also investment insurance.
It is both insurance and investment (if we are considering investment insurance) or savings (if endowment).
Schemes of endowment and investment life insurance are similar:
A client pays premiums to insurance company, in a large lump-sum amount or smaller regular contributions.
Insurance company invests the money received in various financial instruments simultaneously providing the client with insurance coverage.
If nothing happens to them during the contract term, he receives back his contributions plus, possibly, something more at the end of this period.
If an insurance event occurs, the client receives insurance benefit, which size depends on the terms of the contract.
In standard programs, a client buys a policy. And if something happens to them, that is, insurance event occurs the insurance company simply pays compensation, which size is usually several times higher than the policy cost. If nothing happens, then nothing is returned to the client, the insurance premium becomes the insurance company’s profit.
With endowment and investment life insurance, you will receive insurance premiums back, if, of course, you comply with the terms of the contract.
Most often, both ILI and ULI cover death and disability. It could also be loss of labor capacity.
Sometimes companies specifically list such a risk as "accidental death". If the insured client dies as a result of an accident, the beneficiary under their contract will receive a benefit both on risk of death and risk of accidental death.
It is not uncommon for companies to offer a service where, upon receiving a disability, the client is exempt from premiums. The insurance company pays them for customer and undertakes to pay the estimated amount at the end of the contract.
Photos are from open sources.