Insurance Basics | Clever Girl Finance https://www.clevergirlfinance.com/category/building-wealth/insurance-basics/ Empowering women to achieve financial success. Fri, 21 Jun 2024 19:13:09 +0000 en-US hourly 1 https://www.clevergirlfinance.com/wp-content/uploads/2018/09/cropped-Favicon-06-12-400x400.png Insurance Basics | Clever Girl Finance https://www.clevergirlfinance.com/category/building-wealth/insurance-basics/ 32 32 The Benefits Of Life Insurance: Evaluating Your Needs https://www.clevergirlfinance.com/benefits-of-life-insurance/ https://www.clevergirlfinance.com/benefits-of-life-insurance/#respond Wed, 15 May 2024 18:36:12 +0000 https://www.clevergirlfinance.com/?p=67363 […]

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What happens when the breadwinner of a family of four suddenly passes away in an unexpected heart attack? In addition to emotional turmoil, the remaining family may face financial stress unless they have life insurance. One of the biggest benefits of life insurance is financial protection for loved ones.

The benefits of life insurance

While working in the financial services industry, I saw a very similar and unfortunate situation play out where the breadwinner of the family passed away suddenly.

Of course, there’s no replacement for a lost family member, but the money from life insurance helped the man’s wife and two young children have financial peace of mind. It gave them the space they needed to grieve. And that’s just some of the benefits of life insurance.

No one wants to think about their death, but it’s a part of life. Planning ahead with life insurance could help your loved ones overcome financial obstacles when you pass—and some policies can provide living benefits to you as well. Dive in to learn more about the advantages of life insurance and learn how to evaluate your life insurance needs.

Benefits of life insurance

You probably know how important life insurance is for women, but it’s still a good idea to understand the complex advantages and disadvantages of life insurance.

In most cases, the advantages of life insurance outweigh the disadvantages—by a lot. Let’s take a closer look at the distinct benefits of life insurance.

Help protect your loved ones

Life insurance is an important part of your estate planning checklist. One of the biggest advantages is the financial protection it provides your loved ones if you pass away.

Imagine what could happen to your family if you weren’t around to care for them. Depending on the situation, your loved ones could quickly fall into a bind without your financial support.

Unfortunately, that could lead to additional stress as they navigate an emotionally challenging time without you. With the financial support provided by insurance, your family can stay on track. Your thoughtfulness will continue to help provide for them while they grieve and beyond.

In addition, the payout from your insurance policy could help your family get ahead financially.

For example, your policy may be able to help cover the cost of college tuition for your children.

Peace of mind

Do you have dependents who rely on you to support their financial needs? If so, you may find it easier to see the benefits of life insurance, such as providing income replacement if you pass away.

You’ll protect your peace knowing that your family will be taken care of financially, even after you’re gone. The simple fact that your family will find financial help is enough to make anyone feel more comfortable.

It can cover funeral expenses

No one really wants to think about their funeral. But one of the leading benefits of life insurance is it can cover costly funeral expenses.

The median cost of a burial funeral in the United States is $8,300That’s a lot of money that could help your family in their time of need.

Provide potential tax advantages

Some of the advantages of life insurance aren’t directly related to the payout of a policy. Namely, many life insurance plans offer tax benefits to policyholders and beneficiaries.

When an insured passes away, their beneficiary can receive a lump sum payout of the life insurance death benefit tax-free. Not having to pay taxes on a large sum of cash helps the money go further in covering expenses.

Policyholders can also get tax benefits from life insurance through tax-deferred cash value. Permanent life policies that include cash value components let policyholders save a portion of premium payments into a cash value account. The money in this account generally earns interest (or investment earnings) over time.

However, the policyholder doesn’t have to pay taxes on the earnings until they withdraw funds.

Build generational wealth

The most basic use of a life insurance policy is to provide financially for your loved ones after you’re gone.

For example, a policy might help replace your income so your partner can pay the mortgage and other ongoing bills well into the future.

However, you can also use a life insurance policy to build long-term wealth for your heirs—and generations to come. The right life insurance plan can provide the windfall needed to start the process of building generational wealth.

Generational wealth refers to assets that pass from one generation to the next. These assets continue to grow over time, providing each future generation with a larger financial safety net.

Let’s say you have a life insurance policy with a death benefit that could pay off your remaining mortgage balance with enough left over to invest. When you pass, your beneficiaries pay off the house.

Now, they have debt-free housing and can put more money into savings and investments. When they pass, their children inherit the house and a sizeable savings. The children rent the house for additional income and continue to invest their savings.

May offer living benefits

Many life insurance companies make it easy to tailor your life insurance policy to your needs through riders. Riders, also called policy endorsements, are optional coverage you can add to your regular policy.

Riders can increase the benefits of life insurance, but adding riders generally increases premiums. Insurance riders are most common on permanent life insurance, such as a whole-life policy.

Some of the most popular insurance riders are known as “living benefits.” Life insurance is designed to provide financial support to loved ones after you die, but living benefits riders let you use your policy while you’re still alive. Common living benefits riders include:

Accelerated death benefit

This rider gives the policyholder a portion of the death benefit if they’re diagnosed with a terminal illness and a shortened life expectancy, which they can use for medical bills and related expenses.

Critical illness

This endorsement pays the policyholder a lump sum payment if they’re diagnosed with a medical condition specified by the policy, such as cancer or heart attack.

Chronic illnesses

A chronic illness rider helps policyholders pay for caregiving costs if diagnosed with a chronic illness that impairs cognitive function or two or more activities of daily living (ADLs).

Long-term care coverage

This type of rider helps cover the cost of long-term care, such as living in a nursing home or assisted living facility.

Waiver of premium

This endorsement waives future premium payments if the policyholder becomes physically impaired or very ill.

Although less common, some term policies offer living benefit riders for policyholders.

For example, you may be able to add a terminal illness rider to a term policy.

Disadvantages of life insurance

Although there are many advantages, let’s dive into a few disadvantages to help you decide what’s best for your situation.

Certain policies are costly

In the long run, the benefits of life insurance are wonderful for your family.

However, some policies can get costly depending on the type of life insurance coverage you get. That’s why it’s important to evaluate your needs to determine what’s best for you and your family.

For example, I generally recommend that people looking for permanent life insurance consider universal life policies instead of whole life policies. That’s because whole-life policies can be more expensive when comparing premium dollars to benefits.

Discovering the advantages and disadvantages of life insurance can help you decide on coverage, which could save some costs. Be sure to do some research before getting a policy, such as understanding the difference between a term life policy vs whole life insurance policy.

Your age is also a factor in cost. For instance, the average term life insurance policy for a 25-year-old non-smoker is $31 per month, but if you’re 50, it’s $118.

Hidden terms or exclusions

Life insurance is complex and can be overwhelming if you don’t know what to look for when reading a policy. Some policies may have specific terms or exclusions of what’s covered that you’re expected to know.

For instance, some insurance carriers may deny you or the cost can be higher if you participate in dangerous sports like scuba diving or have health conditions.

This means if they do offer a policy, it will come at a higher price. Plan to review your policy with your agent so you understand precisely what it will cover if something happens to you.

Expert tip: Consider term life insurance at the minimum

Don’t think you can afford life insurance? Even if you don’t have a lot of assets or any dependents, a small budget-friendly life insurance policy, like term life insurance, could help loved ones cover your final expenses if you pass away. So take some time out to explore your term life insurance options based on your budget.

How life insurance works

Life insurance is a contract between you and a life insurance company. You promise to pay your premiums for the duration of the policy.

In return, your insurance company promises to pay the face value of your policy to your beneficiaries if you pass away while the policy is active. Your beneficiaries could be a spouse or partner, children, or even a charity organization.

There are also two main types of life insurance:

  • Term life insurance policy
  • Permanent life insurance (such as whole life or universal life insurance)

Term policies offer coverage for an agreed-upon term, such as 20 years. Your coverage expires at the end of the year.

Permanent coverage, on the other hand, provides insurance benefits for your entire life. Permanent policies include a cash value component, which lets you save up part of your premium in a savings account. Some permanent policies may even pay dividends.

Do I need life insurance?

Although there are clear benefits of life insurance, you may not think you need to pursue this path. Let’s look closer to find out if life insurance is in your best interests.

Do you have dependents?

If you have dependents who rely on your income, then life insurance is an easy decision. You should absolutely purchase a policy that will help protect your spouse and children if something happens to you.

If you don’t have any dependents, life insurance becomes a bit more complicated. While some people may wait until they are preparing for a baby or have children to take out a life insurance policy, there are benefits to getting one earlier than that, especially if you have a spouse who relies on your income.

Do you share financial obligations?

Beyond protecting your dependents, you should take measures to help protect anyone with whom you share financial obligations. Take a minute to consider any financial obligations that could become a burden to those you leave behind.

For example, many young, newlywed couples could benefit from life insurance, even if they do not have children. It’s especially true if they have a substantial amount of student loans or will need to lower credit card debt that requires two incomes to repay. If you left your spouse behind prematurely, could they comfortably afford the life you have built together?

Beyond shared debt between partners, you may have co-signed loans with another family member. Without life insurance, they could be put in a difficult situation if you left this world unexpectedly.

If you have a mortgage, life insurance can be a great way to guarantee your loved ones aren’t left with your debt if you pass away. I highly recommend a term life policy that covers the balance of your mortgage. Just make sure your term is at least as long as your remaining mortgage term.

Why shouldn’t I delay getting life insurance?

It’s easy to look at life insurance as another expense you don’t want to add to your budget. With that, it is tempting to put off purchasing a policy until it is absolutely necessary.

But if you delay it too long, it might be too late to help protect your family if something unexpected arises.

If you are looking to save money on life insurance, then you should move forward as quickly as possible. From a cost perspective, it makes more sense to purchase a life insurance policy while you are young.

In my experience working in life insurance, the cost increases significantly as you get older—even between ages 29 and 30! That’s simply because life insurance rates are often the cheapest when you are young and perceived to be very healthy.

Plus, it can be a better value for your money to purchase a policy earlier in life since you can typically lock in a lower rate when you are still young and in good health.

If you think your family could benefit from life insurance, now is the best time to act. Once you decide life insurance is a good choice for your situation, putting off the purchase could lead to higher rates.

Beyond the cost, delaying your life insurance could lead to dramatic consequences for your family if you aren’t able to finalize a policy in the event something happens to you.

Is it really worth having life insurance?

In many cases, yes! One of the benefits of life insurance is that there are many different types of policies to choose from. This makes it easy to find a policy that fits your needs and budget.

Life insurance can help your family pay expenses, cover funeral costs, and more without worry.

Do you gain money from life insurance?

Permanent life insurance policies feature a cash value component, which lets you build cash within your policy. You can use your cash value in many ways, including:

  • Supplementing retirement income
  • As an emergency fund
  • Paying life insurance premiums
  • Collateral for a loan

What types of life insurance are there?

There are several types of life insurance, but all fall into two categories: term life insurance and permanent life insurance. Term policies provide coverage for a specified amount of time, called the term. At the end of the term, the policy expires, and the insured is no longer covered.

Permanent insurance covers your entire life, providing you pay your premiums. Permanent policies also include cash value options to help you build cash savings from your premium payments.

Term insurance policies are generally less expensive than permanent policies.

If you learned more about life insurance from this article, check out these other helpful reads about insurance!

Get the benefits of life insurance to ensure your peace of mind

There are advantages and disadvantages of life insurance, but it is an excellent way to help protect your loved ones from financial stress.

With a life insurance policy, you can help protect your family from the financial repercussions of your passing. It can allow them to mourn in peace without wondering how they will be able to pay ongoing bills.

Even if you don’t have dependents or major assets, I recommend considering life insurance as a way to help cover your final expenses if you were to unexpectedly pass away.

Learn even more about life insurance with our completely free “Life Insurance 101” course! Don’t forget to tune into the Clever Girl Finance YouTube channel and Clever Girls Know podcast for more key financial tips!

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How Does Cash Value Life Insurance Work? https://www.clevergirlfinance.com/cash-value-life-insurance/ https://www.clevergirlfinance.com/cash-value-life-insurance/#respond Tue, 09 Jan 2024 21:55:17 +0000 https://www.clevergirlfinance.com/?p=63336 […]

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We all love cash value, so it seems like a no-brainer to have cash value life insurance. But how does cash value life insurance work, and is it a good idea? Get a better understanding of this type of life insurance and whether it’s the best choice for you or not.

Cash value life insurance

Well, let’s talk through it. Even though the importance of life insurance cannot be overstated, a cash value policy may not be what you expect. It’s likely a lot more expensive than you thought, too.

In this article, we’ll go over what cash value life insurance is and how it works. We’ll also explore cash value life insurance pros and cons.

Our goal is to help you understand it so you can make the best life insurance decision for yourself!

What is cash value life insurance?

It’s more than basic life insurance coverage. It’s a type of life insurance policy with a savings account attached to it, called the cash value component. As you pay premiums, you fill your cash value account.

Most cash value insurance policies are permanent life insurance. Permanent insurance means the policy lasts for your lifetime or as long as you pay the premiums.

How does cash value life insurance work?

In general, cash value policies work like any other life insurance policy. You pay a premium to the insurance company. In exchange, your loved ones receive the death benefit payout from the life insurance company when you die.

In addition, it allows you to save in a cash value account. The insurance company deposits a portion of your premium payments into your cash value account.

Whether through interest or investments, the hope is that your cash value will grow over time, which can be a motivation for saving money. The cash value decreases the insurance company’s risk because they use the money to offset the death benefit when they pay it out.

Or, you can use the cash value as extra cash savings for yourself.

How you build cash value

Insurance companies use your premium payments for three things:

  • The cost of guaranteeing the death benefit.
  • Administrative costs of the insurance company.
  • Your cash value account.

You only receive a portion of your premium amount in your cash value account. The exact portion of your premium that goes toward cash value will vary depending on the type of policy you have.

How your cash value grows

Cash value grows differently for different types of permanent policies.

In addition to your premium contributions, your cash value account might grow in a few ways:

  • Interest earnings from fixed interest rates
  • Interest earnings tied to an index
  • Earnings from investments in securities

The amount you can earn in a cash value life insurance varies based on a few factors, most importantly, what type of policy you choose.

Modified endowment contracts (MEC)

Surprisingly, you can put too much money into your cash value account. Overfunding your cash value account above legal tax limits turns your policy into a modified endowment contract, or MEC.

A MEC still works like life insurance on the insurance side—your beneficiaries will receive the death benefit when you die.

However, MECs come with tax implications. While you receive tax benefits from cash value life insurance, MECs do not.

Once the IRS relabels your policy as an MEC, there’s no way to convert it back to regular life insurance.

Types of cash value life insurance

You have a few options when choosing an insurance policy. Knowing the features of each can help you decide.

Whole life insurance

What about a term vs whole life insurance policy? A whole life insurance policy is different from a term policy in that it lasts your entire life.

It has the same premium for the policy’s life, and the insurance company sets a set rate of return on the cash value. Most policyholders earn around 1.5% for guaranteed cash value, claims Consumer Reports.

Universal life insurance

Universal life policies are more complicated than whole life because you have flexibility with the premiums and coverage amounts. As long as you cover the minimum premium for the death benefit, you can pay more or just the minimum amount each month.

If you have extra money, you can pay it toward your universal policy and invest it in the cash value. You can also have your premiums deducted from the cash value when your cash value reaches a certain point.

Variable life insurance

If you want more than a ‘savings account’ for your life insurance’s cash portion, variable life offers investment options, such as stocks and bonds. It’s riskier because there’s no guarantee your cash value will appreciate (it may decrease). But the reward is often much more significant.

Expert tip: Use the cash you earn

Your beneficiaries typically won’t get any cash value left in your policy when you pass away. As you get older, you might want to use more of your cash value so less goes back to the insurance company.

Whatever you do, make these funds part of your financial planning process so you know what you’re going to do with the money.

Cash value life insurance versus term life insurance

Cash value life insurance is not the same as term life insurance. They have the same premise – a death benefit that pays your loved ones when you die, but that’s it.

Term life insurance doesn’t have a cash value and will lapse after a certain timeframe.

For example, a 10-year term policy expires after ten years. If you’re alive (that’s a good thing), the policy expires.

Finding the best term life insurance is great if you want coverage without a lot of expense, but it doesn’t grow your savings.

Some insurance companies allow you to convert it to a permanent policy or renew the term. You’ll also likely pay more for coverage, though.

Pros and cons

There are benefits of life insurance with cash value and downsides. Understanding both sides helps you choose the right policy.

Let’s take a closer look at cash value life insurance pros and cons to see if it’s right for you.

Pros of cash value life insurance

  • It lasts for your lifetime. As long as you pay your premiums, your beneficiaries will receive the insurance’s death benefit.
  • You may use the cash value to cover your premiums after years of paying premiums.
  • You can borrow from the cash value and/or withdraw funds from it to use while you’re alive.
  • The money grows tax-deferred. You don’t incur a tax liability until you withdraw the earnings.

Cons of cash value life insurance

  • The premiums on a cash value life insurance policy are much higher than term life insurance policies.
  • The fees can be high. You may find less costly ways to invest the extra money you pay toward your life insurance.
  • Cash value policies are often hard to understand. Some people buy them without fully understanding what they’re buying or investing in.

Who should and shouldn’t apply for cash value life insurance?

Like any financial decision, whether this insurance is right for you or not depends on your situation. Young families usually stick with term life insurance policies. They are predictable and cover families when they have the least money available for a crisis, such as death.

A term policy can cover events such as a mortgage, children going to college, or providing a surviving spouse with income.

Cash value policies are more expensive, but they provide another outlet for investing. If you’ve maxed out your retirement contributions in your 401K and/or IRA, a cash value policy may make sense. 

You should also make sure you’re secure in all other areas of your financial life. 

Do you have an emergency fund? Have you paid off all consumer debt? If you have disposable income you’re looking to invest, then a cash value policy may make sense.

5 Ways to access your cash value life insurance

You can’t walk up to an ATM and withdraw the cash value of your life insurance policy. You may only access the cash in one of these five ways:

1. Take out a loan against the cash value

Once you accumulate a cash value, you can take out a loan. The insurance company determines the terms, and yes, you’ll pay interest. Even though you pay this interest to yourself, it’s still a cost. 

If you don’t pay the loan back, the insurance company decreases the death benefit dollar-for-dollar when you die.

2. Make a partial withdrawal

While you can’t get the money from an ATM, you can partially withdraw some of your policy’s cash value. It leaves your policy intact but decreases the total death benefit.

3. Surrender the policy

If you’ve decided you no longer want the policy, you can surrender it. You receive the cash value, and the policy ends.

However, you won’t get the full amount of your cash value account. The actual amount you’ll receive is called the cash surrender value. The surrender value is your cash value balance minus taxes or fees.

Most insurance companies charge surrender fees to cancel policies before your death. You’ll also need to cover any income tax liabilities incurred from withdrawing earnings.

Your loved ones no longer have a death benefit, but you also don’t have to pay premiums.

4. Sell your policy for a life insurance settlement

Some brokers offer a life insurance settlement, which means they offer to settle your life insurance for a lesser amount. If your policy is worth $100,000, they’ll offer a payoff that’s less than $100,000. Settling may provide you with more than surrendering the policy, but if you settle for more than the total premiums paid, you’ll owe taxes on the capital gains.

5. Pay the premium with the cash value

If your cash value is high enough, you may use the cash to pay your premiums on your permanent life insurance policy. You may find this helpful if you’re struggling financially.

What can you do with the cash?

The cash is yours to do what you want. The life insurance company doesn’t tell you how to use it or approve your intended use.

Remember, when you take the cash, you decrease or surrender the death benefit. If you intend to leave your loved ones with a legacy, support a loved one financially, or want to help your family with your estate costs, invest the cash somewhere. They’ll be able to access it when you die.

What life insurance is best for cash value?

Any permanent life insurance policy that has a cash value component can help you build savings.

In general, whole life policies tend to grow slower than universal life or variable life policies due to the fixed interest earnings.

The best earning potential comes from a variable life insurance policy.

However, your money is not guaranteed in a variable life policy and could lose value.

Is cash value whole life insurance worth it?

Whole life insurance could be worth it, depending on your life insurance goals. A whole life policy is often expensive.

But, whole life coverage generally guarantees your cash value earnings thanks to fixed interest rates. If you’re looking for guaranteed growth of your cash value savings, whole life might be worth it.

Can you cash out your cash value life insurance policy?

Yes, there are a couple of ways to cash out your life insurance policy. The first is to take a loan against your cash value balance. You’ll pay interest on the loan, and if you don’t pay it back before your death, the insurance company will decrease your death benefit.

You may also withdraw cash from the account, which also lowers the death benefit. Finally, you can surrender your policy.

However, this means your policy is no longer in effect, and you’ll generally have to pay a surrender fee and taxes on the money.

If you found this article informative, you’ll love reading these other posts about various types of life insurance!

Cash value life policies are worth considering but you should think about all your options

A cash value policy has its benefits, but only in certain situations. If you haven’t maxed out your tax-advantaged retirement or you still have debts, investing your money in those areas may provide a greater return on your investment.

You may wonder, “Do I need a financial advisor?” Consider talking with one about your options (and understand how does cash value life insurance work) before finding a policy. They can help you better understand your options and get life insurance quotes to meet your needs.

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Term Life Insurance VS Whole Life Insurance? What’s Best for You? https://www.clevergirlfinance.com/term-vs-whole-life-insurance/ Mon, 07 Mar 2022 12:05:00 +0000 https://www.clevergirlfinance.com/?p=9167 […]

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Life insurance. It's one of those things that no one ever likes talking about, but it's essential to ensuring any wealth you've built is preserved for your future generations as an inheritance. Something that isn't discussed enough is term vs whole life insurance pros and cons.

In a study by the Life Insurance and Market Research Association (LIMRA), it was determined that over 100 million households (40%) are uninsured and underinsured. In addition, 44% of households in the U.S. would face financial hardship if the primary wage earner died.

These stats highlight why having life insurance is essential. No matter what type of life insurance you choose, it's a way to shield your investments and assets to make sure they're distributed properly to your designated beneficiaries if something happens to you.

Even if you have no investments or assets at the time of your death, having life insurance can ensure that your loved ones are taken care of when you are no longer here.

So, the two types of life insurance are term life insurance and whole life insurance. But which should you get? Let's get into the difference between term life insurance vs whole life insurance, and the benefits of term insurance and whole, so you can make a financially sound decision.

Term life insurance vs whole life insurance: What's the difference?

Let's take a look at each, along with the term vs whole life insurance pros and cons:

What is term life insurance?

A term life insurance policy is life insurance coverage that covers you for a set period of time and has no cash value account associated with it.

As a result of this, the premiums are often lower than a whole life policy, which is one of the benefits of term insurance. When you choose a term life policy, you'll choose a certain duration of years to be covered; typically a 10 or 20-year term policy. So it's long-term but not lifetime insurance.

This insurance breaks down into two different types of term life insurance:

Group term life insurance

Group term life insurance is insurance that an employer offers to its employees as a benefit. It covers the employees of the company instead of a single individual.

However, the coverage of this policy can run short of what your needs may be, so you may want to consider purchasing an individual policy. Or you could expand your existing coverage and pay the premium difference that your employer provides.

Individual life insurance

Individual life insurance is more expensive but provides more coverage that will fully protect your loved ones when needed.

You also get to customize your coverage with this type of policy rather than settling for what your employer offers with their group plan. It's good to research and calculate how much life insurance you need for your unique situation.

What is whole life insurance?

Whole life insurance, also called permanent insurance, is life insurance coverage that combines life insurance with investments and lasts the entire lifetime of the person insured.

This is one of the big differences when considering term life insurance vs whole life insurance. This addition of investments is called "cash value" and is placed in a cash-value account. It is also known as cash value life insurance.

With a whole life insurance policy, you'll pay monthly premiums for coverage, but a portion of that amount will be put into an investment account. Your beneficiaries will receive any excess premiums at the time of your death.

With a policy like this, the premiums are often higher due to the additional benefit of the cash value account.

What is a cash value account and how does it work?

When you pay your insurance premium, they will use part of it to actually pay for your insurance. But the other part goes into an investment account that accumulates wealth over the life of the policy, aka, your lifespan. This account is called a cash value account.

With a cash-value account, you can withdraw money from your policy in the form of a loan plus interest. This is a great feature, but one catch is that if the loan hasn't been paid back at the time of your death, the death benefit amount paid to your beneficiaries is decreased by the outstanding loan amount.

Here are a few ways you can use a cash account:

Other types of permanent life insurance

Index universal life is another type of universal life insurance. You can't lose money with an index universal because the cash value interest rate can't go down, but it can go up. However, there's a limit to how high it can go.

Variable universal life insurance has no limit on how high or low it can go. So there's the potential to make a profit on the cash value, but it is riskier than an index universal.

You've already heard about traditional whole life policies, and that will be explained in more detail soon.

Pros and cons

When it comes to term life insurance vs whole life insurance, how do you decide what is best for you? Well, just like any big financial decision, it comes down to the advantages and disadvantages. So let's dive into the term vs whole life insurance pros and cons.

Benefits of term life insurance

It's always better to start with the good news first, right? So here are a few benefits of term life insurance:

Specified coverage terms

With a term life policy, coverage lasts for a specified number of years instead of for your entire life. For example, you can choose a policy term of 10 years.

So if you have a life insurance policy of $150,000 for a 10-year term and you passed away, then your family would receive the $150,000 from the policy. This makes term life insurance more affordable than a whole life policy.

Fixed payment premiums

One of the benefits of term life insurance is that your premium payments are a set amount for the specified coverage period. You can choose terms ranging from 10, 15, 20, and 30 years and the premium will be that price through the entire term.

Can convert to a whole life policy

If you decide to, you can convert your term life insurance into a whole life policy. However, you will have to convert it before the deadline clause. Be sure to know the details of the conversion clause because it can save you from having to do it later if you need it.

More affordable policies

Because there is no cash value accumulation like there is with a whole policy, the premiums are lower. This could be a good option if you are searching for a more affordable policy that fits into your budget. Price is one of the big benefits of term insurance.

Disadvantages of term life insurance

Now that you know the benefits of term life insurance let's dig into the disadvantages of term life insurance.

You could potentially be denied

When you renew your policy, your insurance company may require you to answer questions about your health and submit to a physical exam all over again.

If you were to develop a health condition it could increase the cost of a new policy. Also, the insurance company may prevent you from renewing your policy due to your age.

Limited coverage due to age

One of the big disadvantages of term life insurance is limited coverage. As you get older, the number of years your life insurance coverage may be renewed is limited.

For example, if you obtain insurance at 20, you can choose coverage for 10, 15, 20, and even 30-year terms. But at 60, providers may limit you to shorter terms of 10 or 15 years.

Premiums increase

Premium costs for a term life policy can increase with each policy renewal. So if you choose a ten-year policy and then decide to buy another, the life insurance cost could increase significantly with each renewal.

Benefits of whole life insurance

There are many benefits of whole life insurance; here are a few of the biggest reasons you should consider a whole life insurance policy:

Lifetime coverage

The biggest difference when comparing term vs whole life insurance is the type and length of coverage you get.

Remember with term life you will have coverage for a certain timeframe, but with whole life, it is lifetime coverage. That is great for peace of mind when it comes to protecting your family financially.

Whole life policies have cash value

Another one of the biggest benefits of whole life insurance is you have the benefit of cash value accumulation. Again, you can borrow from your cash value account to supplement retirement, future premium payments, or your child's education.

Earn dividends

If you invest in a dividend-paying whole life policy, you have the potential to earn annual dividends based on your policy amount.

This is when the company pays an annual amount to its policyholders if they perform well. Although the amount may vary, it's still one of the best benefits of whole life insurance.

Disadvantages of whole life insurance

Let's get down to the nitty-gritty of the disadvantages of whole life insurance.

Premiums are higher

Since you will have lifetime coverage and cash value with your policy you will pay a higher premium. So you will need to review your budget to see if you are able to afford the coverage you will need to invest in.

Benefits can reduce

Again, if you borrow from your policy and there is an outstanding balance, the amount of benefits will reduce.

You will need to determine if it's worth risking that chance when borrowing from your policy fund. Assess your financial situation first before diving into your cash fund.

You could earn more with better investments

You are likely to get better returns investing in an index fund for example. Building generational wealth through strategic investments may earn you more return than what a whole life policy could offer.

So now you know the disadvantages of whole life insurance and the term vs whole life insurance pros and cons, but do you even need life insurance? Let's discuss.

Is it necessary?

You probably have insurance on your home, rental property, car, cell phone, pet, jewelry, and even your vacations, right? So why not your life? After all, your life is your most valuable asset!

You've heard about term vs whole life insurance pros and cons. But, if making the decision to purchase life insurance is difficult, answer these questions first:

  • Does anyone rely on my income for their daily living?
  • If I pass away today, is there enough money to cover the mortgage and other bills and debts?
  • How would my income be replaced to provide for my family and support the education or college tuition of my kids or dependents?
  • Will my family have enough to cover my funeral expenses without causing financial hardship?

Two main reasons to get life insurance

Depending on how you answered the above questions, here are 2 main reasons why you may want to consider getting life insurance:

  1. For the cost of your burial and final expenses.
  2. To replace lost wages from your passing.

Which should you get?

Term life insurance vs whole life insurance can be tough to compare. But it's important to come back to what your needs are. As stated earlier, life insurance is a way to shield your investments and assets and make sure they're distributed properly to your designated beneficiaries in the event of your passing.

It is not designed to be a money-making scheme. And if you are leaning towards whole life insurance solely for that reason (cash value), you should seriously consider the high premiums and sub-par returns on whole life insurance investments, which is one of the disadvantages of whole life insurance.

Ideally, your goal should be to pay off your debt and bulk up your savings and investments. Once you are able to achieve this level of financial wellness, you are less likely to need insurance for your entire life. This is because you would have built up considerable assets if you follow a solid financial plan.

And so the benefits of term insurance may outweigh whole life insurance in some cases. You can put the money you would otherwise be paying to higher premiums towards achieving the financial goals you have laid out in your financial plan.

There are instances where lifelong coverage (whole life insurance) may work for you. For instance, if you are a high-income earner with a need for life insurance. Or you have maxed out your 401k, traditional IRA and ROTH IRA, and 529 savings options and are seeking additional diversification.

Still unsure? To help you better make the decision of term life insurance vs whole life insurance, it may be worth meeting with a licensed life insurance professional who will act in your best interest. That way you can take a closer look at your options.

Term vs whole life insurance: Pick what's best for you!

The cost of insurance, especially term life insurance, is much lower than most people think. So it's a good idea to have a conversation with your family about life insurance. But there are both benefits and disadvantages of term life insurance and whole.

You don't want to put money into a life insurance policy if it is not necessary, but you also want your family's financial needs to be taken care of in the event of your passing. Be sure to determine what works best for you when it comes to choosing term life insurance vs whole life insurance.

Learn everything you need to know about life insurance with our completely free "Life Insurance 101" course!

The post Term Life Insurance VS Whole Life Insurance? What’s Best for You? appeared first on Clever Girl Finance.

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Is Pregnancy Life Insurance A Thing? https://www.clevergirlfinance.com/pregnancy-life-insurance/ Tue, 08 Feb 2022 21:58:58 +0000 https://www.clevergirlfinance.com/?p=17343 […]

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Pregnancy life insurance

Starting a family is one of the most exciting parts of life. It can also be one of the most terrifying — especially for new parents. There are so many things to prepare before having a baby, from furniture to diapers. That said, you should also think about pregnancy life insurance.

A life insurance policy helps protect your child if you or your partner passes away. It covers daily needs as well as future costs like education. You might be able to get life insurance even if you’re already pregnant. This guide will help answer all your questions about pregnancy and life insurance.

Can you get life insurance while pregnant?

Yes, you can still qualify for life insurance when you’re pregnant. How far along you are in pregnancy can play a role. It may be more difficult to get life insurance as your body changes through pregnancy.

What factors affect life insurance eligibility?

Life insurance companies want to insure healthy people. A young, healthy person is less likely to pass away than an older person in poor health. This makes the younger person less risky to insure.

Insurance companies look at several factors when deciding to insure someone, including:

  • Age
  • Overall health such as weight
  • Health history, including pre-existing conditions like heart disease or diabetes
  • Smoking and tobacco use
  • Dangerous hobbies such as rock climbing or skiing
  • Hazardous occupations including firefighters and miners
  • Driving records and citations
  • Where you live

Pregnancy doesn’t change which factors the company uses. However, it could change your current health. For example, you might develop a chronic condition during your pregnancy. This could limit access to life insurance until your pregnancy is over.

Does my life insurance company need to know I’m pregnant?

You should let the insurance company know you’re pregnant when applying for a policy. Pregnancy is an important piece of health information. Your life insurance company needs to know you’re pregnant to assess their risk.

Disclosing pregnancy for new policies

Life insurance applications require you to answer questions honestly. That means disclosing any medical conditions you have — including pregnancy. Not including this information could be considered fraud.

What happens if you don’t tell the insurance company that you’re pregnant? Your policy might be void. If you’re injured or pass away, your beneficiaries may receive reduced benefits.

The reduced amount helps cover additional premiums you didn’t pay. Your policy could be terminated or a claim denied. This would mean your beneficiaries receive nothing.

Disclosing pregnancy for existing policies

You should only need to let your life insurance company know you’re pregnant if you’re getting a new policy. You don’t need to tell them if your policy is in force.

Existing policies cover you even as your health changes. That’s why it’s important to try and apply for life insurance before getting pregnant.

What do I do if my application is denied because of pregnancy?

Getting life insurance while pregnant isn’t always easy. It’s not uncommon to have your application denied. The good news is you can almost always still get life insurance.

Your best bet might be to wait until after your pregnancy to reapply. Let your body go back to normal after childbirth. This helps reduce health risks caused by pregnancy. You may also see lower premiums than if you got a policy while pregnant.

Life insurance with no medical exam

There is an alternative to waiting until after childbirth. Some life insurance companies offer policies with no medical exam required. This means you can apply for a policy and won’t have to take a medical exam.

No exam life insurance is often more expensive than comparable policies with an exam. The policy options may be less desirable.

For example, you may not be able to get a whole life policy. You’ll also still need to tell the company that you’re pregnant.

However, the underwriting requirements may be more relaxed than traditional insurance. So it makes getting life insurance while pregnant possible.

How does pregnancy affect life insurance rates?

Being pregnant changes your body. For many women, that means their overall health changes as well. See how these changes can affect your life insurance rates.

Pregnancy stage

The stage of your pregnancy could have a big impact on your eligibility for life insurance. Most women have fewer symptoms early in their term. As you progress, you may face more health issues. Applying for life insurance late in your term could make it less affordable.

Weight gain

One of the factors life insurance companies use when rating policies is weight. Someone who is overweight is often susceptible to other health issues. Pregnancy weight gain could increase your rates just the same as regular weight gain.

Luckily, some policies won’t factor in pregnancy weight gain. Ask your life insurance company if pregnancy weight will affect your potential policy.

Pregnancy complications

Only about 8% of pregnancies involve complications that could harm the mother or baby if left untreated. However, less severe complications can still affect your overall health. Common health issues that could affect your insurance rates include:

  • Gestational diabetes
  • Elevated cholesterol
  • History of high-risk pregnancy
  • High blood pressure
  • Anemia

Pros and cons of getting life insurance while pregnant

Considering the advantages and drawbacks of getting life insurance while pregnant can help you decide if you should apply. Let’s take a closer look at what makes pregnancy life insurance a good idea or not.

Pros of pregnancy life insurance

Applying for life insurance during your pregnancy could help you protect your future child. Some of the benefits of getting a policy during pregnancy include:

Cons of pregnancy life insurance

Trying to get life insurance while you’re pregnant isn’t always a good idea. Reasons you might want to skip applying for a policy until later include:

  • The insurance company may deny your application.
  • You may face higher rates due to health concerns.
  • Many policies won’t pay life insurance claims until the policy is a certain age. For example, your policy might need to be in force for six months. If you’re injured or die during childbirth, your beneficiaries might not get the proceeds on a new policy.

Should you apply for life insurance while pregnant?

You can apply for life insurance during pregnancy. Remember that you could face higher rates or even have your application denied. For most women, it’s best to apply when you’re not pregnant.

When’s the best time to apply for life insurance during pregnancy?

If you’re starting a family and want to get life insurance, there are three times you can apply. The best option is to get life insurance before you get pregnant. However, you can also apply during your pregnancy or wait until after the baby comes.

Before pregnancy

It’s best to get life insurance before getting pregnant. Your body won’t be going through rapid changes due to pregnancy. You also won’t be facing any post-partum health concerns.

Applying for insurance before pregnancy also helps protect your family if something goes wrong. For example, your policy must be in force for a year before the insurance company will pay claims. You apply six months before getting pregnant. The policy will be completely in force by the time you give birth.

During pregnancy

You can still get life insurance while pregnant, but it’s likely to be more expensive. Life insurance companies could see your changing health as an increased risk. That usually means you’ll pay higher rates than you would if you weren’t pregnant.

Applying for life insurance during your pregnancy can also be stressful. Taking a medical exam may not be something you want to deal with when preparing for a baby.

After pregnancy

If you’re already pregnant, you might want to wait until after the baby comes to apply for insurance. Remember to give your body a few months to heal and go back to normal before you apply.

Getting life insurance after your baby is born could lead to better rates. That’s because there’s less risk for your life insurance company once pregnancy is over.

Common questions about pregnancy and life insurance

Life insurance is confusing enough on its own. Adding pregnancy only makes it more complicated. We’ve got the answers to your pregnancy and life insurance questions, so you can protect your new family with life insurance.

Should my baby be my beneficiary?

It’s generally not recommended to list a minor as your beneficiary. Minors can’t legally receive the money from a life insurance policy.

In some cases, the state will appoint a legal guardian for your children. The guardian would receive the funds and be in charge of managing them. This could lead to mismanaged funds.

Listing your co-parent as beneficiary

A better alternative to listing your child as a beneficiary is to list your co-parent. A spouse, partner, or other trusted co-parent has shared responsibility for your child.

By listing them as the beneficiary, they receive the funds. They can then use your life insurance proceeds to continue caring for your child after you pass.

Creating a trust for your child

Creating a trust for your child is another option. Trusts are legal agreements that use a third party — the trustee — to manage funds. You would create a trust for your child and name a trustee to manage the money.

The trust becomes the beneficiary of your life insurance policy. If you pass away, the proceeds go to the trust. The trustee is then in charge of distributing the money for your children, such as to pay for education. Trusts let you choose certain restrictions and rules. This gives you more control over where the money goes, even after your death.

Does my partner need life insurance as well?

It’s a good idea for both parents to get a life insurance policy, if possible. Your policy only covers your life.

Let’s say your partner passes away without life insurance. You’ve lost their income, time, and support to help raise your children. You also won’t receive life insurance benefits to help cover what you’ve lost.

What extra coverage should I add to my policy?

Life insurance policies include optional coverage you can add to increase the benefits. This extra coverage comes from life insurance riders. Riders help you customize your coverage based on your needs.

Child rider

Losing a child is most parents’ worst nightmare. However, having a plan in case your child passes away helps reduce financial stress so you can focus on grieving. Many life insurance policies have a child rider option.

A child rider adds coverage for your children to your life insurance policy. There’s no need to buy a separate insurance policy for each child.

Disability income

Unexpected disabilities can prevent you from earning income. A disability income rider protects your family if you’re unable to work. The rider works by paying a supplemental income if you become disabled. Be sure to read your policy carefully to know what qualifies as a disability.

Purchasing pregnancy life insurance is possible

Most life insurance companies will let you apply for life insurance while pregnant. Remember that your health plays a big role in getting approved. Weight gain and health complications during pregnancy could lower your chances of approval. Or, you may face higher premiums due to your health.

The best way to get pregnancy life insurance is to plan ahead. Apply for life insurance now if you’re thinking of starting a family. That way, your policy is in force before you deal with health changes. Be sure to check out our list of best jobs for pregnant women!

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Determining The Best Term Life Insurance For You https://www.clevergirlfinance.com/determining-the-best-term-life-insurance-for-you/ Tue, 08 Feb 2022 13:08:00 +0000 https://www.clevergirlfinance.com/?p=9299 […]

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best term life insurance

If you have anyone that depends on you, then you should definitely consider life insurance. Life insurance can be one of the best ways to protect your family from the financial catastrophe of losing you. When it comes to life insurance options, having the best term life insurance can help to do just that; protect your family's future.

Dealing with tragedy is emotionally difficult, and no one likes to imagine it. Although it can be uncomfortable to think about the need for life insurance, it can provide reassurance that your family is provided for in the worst-case scenario.

If the unimaginable happened, it is easy to see how they would likely feel overwhelmed by the idea of handling new financial responsibilities.

However, you can take steps to find the right life insurance policy now. In turn, you'll know that you’re helping your family to be financially protected no matter what happens to you.

Today we will explore what term life insurance is, how to determine the amount you need, and how to compare term life insurance rates, so you can fit it into your financial plans.

What is term life insurance?

Term life insurance is a type of policy for a set number of years. If you passed away within the set term, then your family would receive an agreed-upon payout amount. In most cases, you’ll have the opportunity to choose a life insurance term between 10 to 20 years.

For example, let’s say you take out a life insurance policy for $250,000 to cover a 20-year term. If you passed away before the 20-year term was up, then your family would receive the $250,000 payout.

Of course, the payout is contingent on the fact that you’ve kept up with your insurance premiums for the duration of your term.

How is term life insurance different from whole life insurance?

If you’ve been researching your life insurance options, then you’ve likely come across whole life insurance as another option. With whole life insurance, you are signing up for your entire life instead of a specified term.

With that, your family will receive a death benefit no matter when you pass away. That is, as long as the policy remains in force.

In addition to the death benefit, there is usually a cash value component associated with whole life insurance. The cash value component is interest paid to a policy.

As you pay your premiums, the insurance company adds these to a general account and invests to help ensure sufficient interest can be paid to a policy based on the terms of the contract.

Due to the extended nature of whole life insurance policies, the cash value component, and the associated commissions and expenses, this type of coverage is usually more expensive.

It's important to understand your options and evaluate what's best for your personal situation before committing to a policy. In many cases, you may be better off choosing a term life insurance policy and investing the difference between the two premiums.

For instance, by investing the difference in index funds, you are likely to get a better return on your investment than a whole life policy after you work out the fees.

You'll also have more flexibility over your investment portfolio. You will also enjoy the peace of mind of a payout for your family if you pass away prematurely.

Who can benefit from it?

If you have anyone that depends on your income at all, then life insurance is a good idea. Of course, the hope is that you’ll live a long and happy life in which the lump sum of your term policy is never paid out. But you likely want to protect the financial stability of your family in the event of your death.

A few people that might consider life insurance include a married couple with a new mortgage or a young mother with children that intend to go to college.

If you are currently paying for a major financial commitment such as a mortgage or a child’s education, then life insurance is something that can help protect those dreams even if you aren’t there.

The idea of life insurance can be scary to think about. After all, life insurance is preparing against the financial consequences of your death. It is important to look past the uncomfortable need for this insurance and take action to help safeguard your family's future.

How to calculate your term life insurance needs

Are you ready to move forward and find the best term life insurance policy for your family? Then the next step is to determine how much coverage you need. Adding up the financial needs of your family in the event of your passing can be tricky.

Luckily, you can take advantage of a term plan calculator. This free tool will ask for information about your current debts, your children, and your financial desires for their future. Use this calculator to get a very accurate estimate of the amount of coverage that you need.

Term plan calculators

It only takes a few minutes to run through a term plan calculator to determine what amount of coverage you need for your family. So, here are a few term plan calculators to get an estimate of insurance costs:

Haven Life Term Plan Calculator

Ethos Life Term Plan Calculator

Fidelity Term Plan Calculator

What is the best term life insurance?

The best term life insurance depends on your specific needs. For instance, if you have dependents, debt, etc. So consider this when calculating how much coverage you will need as well.

There are many companies that offer a range of term life insurance policies. Here are a few of the most popular ones you can start with so you can compare term life insurance rates:

Ladder

With Ladder, you’ll be able to take advantage of term life insurance policies if you are between the age of 20 to 60. The company launched in 2017 and has taken a streamlined approach to term life insurance.

The application is easy to complete online and you’ll have many options to adjust your coverage once you’ve started your policy.

Haven Life

Haven Life Insurance Company is backed by Massachusetts Mutual Life Insurance Company which has over 160 years of experience. They offer some of the best term life insurance that is also affordable.

Another pro is they offer a policy called Haven Simple that doesn't require a medical exam to finalize coverage!

Everyday Life

Everyday Life Insurance prides itself on making your policy more affordable as you age. They offer terms for up to 40 years and up to $10 million in coverage. No wonder it's some of the best term life insurance available.

Ethos

Ethos is another company that offers fast and affordable term life insurance. They are backed by top-rated companies such as Trustage, Ameritas Life Insurance Corp., AAA Life, and Legal & General America.

The great news is they have a free non-binding application and offer a "30-day free look period with a money-back guarantee."

Fidelity Term Life Insurance

Fidelity is no stranger to the finance world. So of course, they also offer some of the best term life insurance for their clients. They provide a quick quote in seconds so you can get a rough estimate of how much your policy may cost.

You can start the process online, and they offer a 15-minute phone call for an expert to walk you through the entire process.

Be sure to compare term life insurance rates so you can get the best price possible for the policy you need.

Is term life insurance right for you?

If you don’t have any dependents or debt, then you likely don’t need life insurance at this time. However, if you have any dependents that rely on your income or if you have a mortgage or other debt, then term life insurance can be a smart financial move. The right life insurance policy can help protect your family financially even if you are no longer there for them.

Term life insurance is truly a way to bring more peace of mind to your life as you work to build a better life for your family. Take action today and compare term life insurance rates to find the right policy and guard your family financially.

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What Is An Irrevocable Beneficiary? https://www.clevergirlfinance.com/irrevocable-beneficiary/ Tue, 01 Feb 2022 00:39:20 +0000 https://www.clevergirlfinance.com/?p=17149 […]

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Irrevocable beneficiary

A life insurance policy helps protect the financial well-being of the people you love. Most people buy life insurance to cover expenses for close family members. These family members are beneficiaries and receive the proceeds of the policy. Beneficiaries can be revocable or irrevocable. An irrevocable beneficiary is near impossible to change once put into place.

So, how do you determine if you should choose which type of beneficiaries to assign? Let’s take a closer look at life insurance beneficiaries and why you may or may not want an irrevocable one.

What is a beneficiary?

A beneficiary is a person you wish to receive the money paid out by your life insurance policy. If you pass away, this person gets the death benefit of your policy.

For example, you have a million-dollar life insurance policy. You name your spouse as the beneficiary. When you pass away, your insurance company awards a million dollars to them.

Can I name more than one beneficiary?

Yes! Beneficiaries aren’t limited to one person. Someone with multiple children will likely want to list each child. You can also name an entity, such as a charity.

Some people set up trusts for their estate and name the trustee as a beneficiary. Life insurance policies without a named beneficiary go to your estate.

You also decide if the beneficiary is revocable or irrevocable. This choice determines how easy it is to change them in the future.

Revocable beneficiary meaning

The policy owner can change a revocable beneficiary. That's why most life insurance beneficiaries are revocable. Using a revocable beneficiary means you’ll be able to change your policy as your life changes.

For example, you have two children when you take out your policy. Years later, you have another child. Your first two children are revocable beneficiaries. You’ll be able to add your third child to the policy as another beneficiary. This is usually done in a simple form.

Irrevocable beneficiary meaning

An irrevocable beneficiary is the opposite of a revocable one. When you list an irrevocable beneficiary, you’re giving up your right to make changes. They aren’t designed to change — even if your situation does.

Let’s look at the example we used for revocable beneficiaries. If your children were irrevocable beneficiaries, it would be almost impossible to add your third child to the policy.

When should you choose an irrevocable beneficiary?

If it’s so hard to change irrevocable beneficiaries, why does anyone use them? There are times when a person is sure about their choice. By naming an irrevocable beneficiary, your plans can't change.

Business owners might list their business partners on a business-owned policy. Or, a parent with a special needs child may want to ensure their financial future.

The biggest thing to remember is that you won’t be able to change your beneficiary. That means you can’t add a new one or adjust how much each receives. You need to be sure it's right for your situation and that it won’t change in the future.

Should my spouse be my irrevocable beneficiary?

Spouses generally shouldn't be irrevocable. Sometimes “till death do us part” doesn’t work out. Say you named your spouse as irrevocable and then got divorced.

Now, your ex-spouse would receive the death benefit, regardless of your current relationship. So, you may not want to list them this way in your estate plan.

Examples of irrevocable beneficiaries

There are a few times where irrevocable beneficiaries make sense. Let's take a closer look at these situations.

Children

Life insurance is an important tool for protecting your children’s future. Many people decide to name their children as irrevocable beneficiaries. Of course, there’s always the chance the relationship could sour. However, many parents consider it their duty to protect their children no matter what.

Naming children as irrevocable can also protect them if you marry someone new. Your new spouse won’t be able to claim the benefits or change your policy if you pass away. You can be sure the money will go directly to your children.

Key man insurance

Business owners have a lot of financial considerations. A big one is what happens if a key employee passes away. For example, your business partner is in charge of product design. If they pass away, you’ll be without their knowledge or expertise. Your business may not be able to continue without them.

To combat this, many businesses use “key man” policies to protect against the loss of knowledge or skills if a partner dies. This is a policy taken out by the business on the life of the key person. The business is the irrevocable beneficiary.

If the key person passes away, the business receives the death benefit. This financial compensation can help the business stay afloat.

Irrevocable life insurance trusts

An irrevocable trust gives you more control of where your finances go after death. You can create rules about when and where your money goes from the trust. Parents might use a trust to give funds to children at certain ages. This prevents a young child from receiving a large death benefit all at once.

You can name your trust as your irrevocable life insurance beneficiary. This means your life insurance proceeds are sure to go to the trust. The instructions within the trust then direct the trustee where to send the money.

Collateral assignment

Some loans let you use life insurance as collateral. To do this, your lender is the irrevocable beneficiary of a life insurance policy. The insurance proceeds cover your outstanding debt if you die before paying it off. If you pay off the loan during your life, the policy dissolves.

Advantages and disadvantages of irrevocable beneficiaries

There are pros and cons to using irrevocable life insurance beneficiaries. So understanding the advantages and disadvantages will help you decide which type to use.

Advantages of irrevocable beneficiaries

An irrevocable life insurance beneficiary gives the policy owner peace of mind. You’ll know exactly where your death benefit is going after you die. Having this peace of mind can be invaluable if you’re a parent or caregiver.

They also help protect loved ones from changing family dynamics. Remarriage, for example, could complicate your children’s claims to your finances. An irrevocable designation guarantees life insurance money goes to your children.

Disadvantages of irrevocable beneficiaries

The biggest disadvantage is the difficulty to change them. Not being able to update your beneficiaries can cause problems as your life changes.

Naming a spouse, for example, could be difficult if your marriage doesn’t work out. Even if you remarry, your ex-spouse has the claim to your life insurance benefits.

Can I change an irrevocable beneficiary?

There is a way to change an irrevocable beneficiary. However, it’s difficult. After all, an irrevocable designation isn’t meant to be changed. Your beneficiary has to agree to the changes. This includes adding new beneficiaries to the policy.

Some states have extra restrictions for these policies. You may have to get your beneficiary’s approval before changing the policy. Be sure to check your state’s regulations before naming beneficiaries.

You can only change irrevocable beneficiaries with their consent. Your beneficiary will have to voluntarily give up their status.

How often should I review my beneficiaries?

It’s important to regularly review your life insurance policies — including beneficiary designations. A good rule of thumb is to look over your policies at any major life event, such as:

What’s the difference between a primary beneficiary and an irrevocable beneficiary?

A primary beneficiary is the main beneficiary of a life insurance policy. A contingent beneficiary is a secondary one. The contingent beneficiary only receives funds if the primary beneficiary can’t.

For example, a primary beneficiary passes away before the policy owner. The policy owner forgets to update the beneficiaries. The contingent beneficiary gets the death benefit when the owner dies.

Primary and contingent beneficiaries tell life insurance companies who should get the proceeds. Irrevocable and revocable designations determine if you can change a beneficiary. An irrevocable beneficiary will always be a primary beneficiary.

How do I designate an irrevocable beneficiary?

You designate beneficiaries when you first take out a life insurance policy. Most applications have a section for listing them. You will likely need their names, addresses, and Social Security numbers.

This is where you will usually choose irrevocable or revocable. Most people choose a revocable beneficiary when taking out a policy. This lets you make changes to your beneficiaries as needed.

Be cautious if you choose an irrevocable beneficiary!

Now you know what the irrevocable beneficiary meaning is, and the seriousness of it. Your life insurance beneficiary is the person or entity who gets your death benefit. Irrevocable beneficiaries are designed to be permanent. They’re nearly impossible to change. Most policies require permission from the beneficiary to make changes.

Are you thinking of using an irrevocable beneficiary? Be sure to talk with an estate planning attorney or other trusted advisor first. They’ll help you decide if it makes sense for your policy.

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Do You Really Need A Million Dollar Life Insurance Policy? https://www.clevergirlfinance.com/million-dollar-life-insurance-policy/ Mon, 03 Jan 2022 21:02:47 +0000 https://www.clevergirlfinance.com/?p=16634 […]

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Million dollar life insurance policy

For many of us, the idea of having a million dollars is hard to grasp — it just seems too big to be real. Would that million dollars be enough to cover your family’s expenses if you passed away? A million dollar life insurance policy might seem like more than enough coverage but is it?

Million-dollar policies are often touted as the best option for everyone. However, you might find that it’s far too much or too little for your unique financial situation. This article will help you decide if a million-dollar plan is right for you.

What is a million dollar life insurance policy?

Getting life insurance is an important step in securing your financial future. You can define a life insurance policy by its death benefit.

A death benefit is the amount your beneficiaries receive at your death. A million dollar life insurance policy is simply any policy with a death benefit of $1,000,000.

Types of life insurance

A 1 million dollar life insurance policy isn’t limited to a certain type of life insurance. There are several types of life insurance to choose from. They’re generally divided into two groups:

  • Term insurance
  • Permanent insurance

Term Insurance

A term life insurance policy covers you for a set number of years, known as the policy’s term. The most common terms are 10 years, 20 years, or 30 years.

Term policies make for straightforward life insurance. You pick the death benefit and length of the policy. As long as you pay the premiums each month, you’re covered until the term runs out.

At the end of the term, your policy expires and you’re no longer covered. Term life insurance is a popular choice.

According to 2020 data from the American Council of Life Insurers (ACLI), 4.2 million new individual life insurance policies were term insurance.

These plans made up 41% of new individual policies. Some reasons people choose term life over permanent policies include:

  • Term policies are less expensive than permanent life insurance.
  • Length of term and death benefit are customizable to fit your needs.
  • You can renew or convert your policy when the term expires.
  • Your premiums stay level or increase at specific intervals, such as every five years.

Permanent Insurance

A permanent life insurance policy stays in effect your entire life, so long as you pay your premiums. Permanent policies also involve a savings component, known as cash value. Part of your premium goes into a dedicated cash value account.

This money earns interest and some cash value accounts let you invest the funds. You can use your cash value to pay your life insurance premiums from the cash you’ve saved up in the account. Permanent life insurance gives you benefits like:

  • Earns cash value over time.
  • Lifelong coverage, so long as you pay your premium.
  • Guaranteed coverage regardless of changes to your health.
  • Your premiums are set and won’t increase over the life of the policy.

How much does a million dollar life insurance policy cost?

So, how much does a million dollar life insurance policy cost? Well, it depends. Higher death benefits usually mean higher premiums.

Other factors can also play a role in your total costs. Despite having the same death benefit, the cost of 1,000,000 life insurance can vary a lot. If you’re considering 1,000,000 life insurance, consider all the factors that affect costs.

What factors affect the cost of life insurance?

Insurance companies check several risk factors to determine your costs. They’re looking to cut the cost of insuring a large group of people.

People who are young and healthy are at a lower risk. It shouldn’t surprise you that your health is the most important factor.

This includes common health-related factors like your age, gender, weight, and medical history. Other factors play a role in a million dollar life insurance policy cost as well, including:

  • Length of term
  • Type of insurance
  • Driving record
  • Nicotine use
  • High-risk hobbies
  • Family medical history
  • Dangerous occupations

Length of Term

If you decide a term 1 million dollar life insurance policy is right for you, your costs change based on how long you want your policy to be active. Longer terms often cost more.

Type of Insurance

The type of life insurance policy you choose will change the cost of your premiums. Permanent life insurance has higher premiums than term policies.

Driving Record

Many insurers will look at your driving history. Drivers with fewer accidents or traffic tickets are less risky to insurance providers. Safe drivers with clean driving records are less likely to be in a fatal accident.

Nicotine Use

According to the CDC, giving up smoking can increase your life expectancy by 10 years. Insurance providers take this into account when approving a life insurance policy.

Tobacco users often have to pay higher premiums for coverage. Long-term nicotine users could have trouble finding a policy at all.

High-Risk Hobbies

The things you enjoy doing on your time off could increase your life insurance costs. People who engage in high-risk activities usually pay more for life insurance. So be prepared for increased costs if you enjoy mountain climbing or skydiving.

Family Medical History

Your family medical history could increase your insurance costs, regardless of your health. Insurance companies look for hereditary diseases or conditions when reviewing your insurance application.

Dangerous Occupations

Like risky hobbies, a dangerous profession could lead to higher insurance premiums. Some lines of work are more dangerous than others.

Life insurance companies take this into account when deciding your insurance costs. Dangerous occupations include electric line installation, police work, and mining.

Who should get a million dollar life insurance policy?

The right amount of life insurance is different for everyone. That’s especially true when considering higher death benefit amounts. Not everyone needs a million dollars in coverage.

Life events, like getting married or buying a house, can change your financial needs. Likewise, you may need more coverage if you earn a significant salary. For example, people who need a 1000000 life insurance policy might include:

Who qualifies for a million dollar life insurance policy?

Not everyone qualifies for a 1 million dollar life insurance policy. Life insurance replaces your income to cover your loved one’s financial needs when you pass.

To qualify for a larger death benefit, you have to justify why you need more coverage. Life insurance companies use your current salary, age, and health to determine your eligibility.

Some insurers will approve a death benefit that’s up to 30 times your annual salary. In that case, you’d need to make about $34,000 per year to be eligible.

Your age is also a factor in approval for a 1 million dollar life insurance policy. Younger people tend to qualify for larger death benefits. Someone young is less likely to need their life insurance benefits anytime soon.

Finally, your current health — and medical history — will affect your approval odds. If you’re healthy, you’re more likely to get approved for a million dollar policy. Most high-dollar policies require a medical exam before approving your application.

How to decide if a million dollar life insurance policy is right for you

It can certainly feel like more is better when it comes to life insurance, but that’s not always the case. Life insurance benefits should replace your income and cover debts if you pass away.

If your earning potential and debts are less than $1 million, you might not need that much coverage. On the other hand, a million dollars can sound like a lot, but it may not be enough.

It might surprise you to learn how many expenses your family faces. Weigh your potential expenses with the cost of premiums for a million-dollar policy. You want to find a balance between enough coverage and affordable cost.

How to calculate your life insurance needs

The simplest way to decide how much life insurance you need is to multiply your annual income by 10-30.

Of course, this method doesn’t go into detail. It can, however, be a great place to start when deciding how much life insurance to buy.

Once you have a loose idea of how much insurance you need, you can start factoring in your individual needs.

Add up the estimated cost of each obligation to get a more precise idea of your insurance needs. Some factors to consider include:

Using a life insurance calculator

Looking for an easier way to calculate your life insurance needs? Modern technology makes it a lot easier to find the right amount of coverage. You can use online life insurance calculators to quickly estimate your needs.

An easy-to-use calculator is this one from Life Happens. This nonprofit’s mission is to help families make smart insurance choices.

How to shop for a million dollar life insurance policy

Shopping for a 1 million dollar life insurance policy is much like shopping for any type of life insurance. You should plan to shop around for the best fit before committing to a plan.

Comparing policies and insurance providers gives you a better chance to get a policy that’s right for you. You could also end up saving money by shopping around.

What to look for when shopping for a million dollar life insurance policy

Million-dollar plans are usually more expensive than those with lower death benefits. Be diligent when shopping to find a policy — and insurance provider — that serves your needs. Look for these things when comparing policies:

  • Good provider rating
  • Premium costs
  • Medical exam requirements
  • Renewability or convertibility
  • Optional riders

Provider Ratings

Picking a good life insurance company is an important part of shopping for life insurance. There are several ratings you can use to help you decide if a company is a good fit.

Start by reading reviews of the company to see what current or previous customers have to say. You can also look at the Better Business Bureau to see recent complaints against the company.

The financial security of the company should also be a big priority. After all, you want to know your insurer can pay your claim, especially if it’s a higher amount like a million dollars. You can look up financial strength ratings from independent agencies.

Premiums

The cost of life insurance is always going to be a big factor in the policy you choose. While you shouldn’t base your whole decision on cost alone, you also don’t want to overpay for coverage.

Collect life insurance quotes for similar policies from multiple providers. Comparing quotes lets you find the best combination of coverage and cost savings.

Renewability

While term insurance policies expire once the term is up, many are renewable. A renewable policy means you can renew the same policy for a new term.

One big benefit is you won’t have to take another medical exam, which could be helpful if your health has declined.

Another term insurance option is a convertible term policy. These policies let you convert your policy into permanent life insurance at the end of the term.

This can be a great way to get affordable coverage when you’re younger and guarantee coverage when you’re older.

Optional Riders

Life insurance policies often let you add optional coverage, called riders. A rider is an extra benefit for your policy. A common option is an accelerated death benefit (ABD) rider.

This lets you access your death benefit while you’re still alive. For example, you can use ADB coverage to help pay for treatment of a chronic or terminal illness, like cancer.

Determine if a million dollar life insurance policy is right for you

Choosing the right life insurance policy for your needs is a very personal decision. There’s no one-size-fits-all answer to protecting your loved ones’ financial future.

You can find the best fit for your family by taking the time to research potential policies. Be sure to ask insurance agents about the details of a 1,000,000 life insurance policy you’re thinking of buying.

The post Do You Really Need A Million Dollar Life Insurance Policy? appeared first on Clever Girl Finance.

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Is Dental Insurance Worth It? https://www.clevergirlfinance.com/is-dental-insurance-worth-it/ Tue, 23 Nov 2021 01:22:46 +0000 https://www.clevergirlfinance.com/?p=15714 […]

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Is dental insurance worth it

Some types of insurance such as health insurance are an obvious must-have for most. But when it comes to dental insurance, the answer is less decisive. Which can leave you wondering: Is dental insurance worth it?

Let’s explore the details of dental insurance so that you can decide whether or not it is the right fit for your mouth and your budget.

How much does dental insurance cost?

So, the big question - how much does dental insurance cost? As with all insurance costs, the amount you pay will vary widely based on your area, insurance provider, and preexisting conditions.

Typical dental premiums can range from $20 to $50 per month for an individual or $50 to $150 per year for a family.  That amounts to $240 to $1,800, which will vary based on your dependent and the type of plan you can access. In any case, that cost could significantly impact your budget.

It’s easy to see how dental insurance could take a bite out of any budget. 

What does a dental premium cover?

The exact coverage your dental insurance plan offers will vary based on your individual plan. But there are some general coverage guidelines you can expect to see. There is a breakdown of coverage with the average plan into three distinct parts -- preventative care, basic procedures, and major procedures.

So, what's covered? In many cases, preventative care is 100% covered. This coverage might include the cost of regular cleaning and exams to check on your dental health each year. For most, regular cleanings equate to two covered cleanings per year.

Next up are basic procedures. Although these aren’t entirely covered, you’ll typically only need to pay 20% to 30% of the cost. Since the cost of a filing to typically well over $100, having dental insurance could come in handy.

Last but not least, dental insurance will help you out with major procedures. Although most insurance plans cover just 50% or less of the cost, that could still save you hundreds of dollars.

What are the different types of dental plans to choose from

The coverage and flexibility you have in your dental insurance plan will vary widely. One of the biggest factors is the type of plan you choose. And the type of plan will dramatically impact whether or not dental insurance is worth it.

Here are the three different types of dental plans to choose from:

Fee-for-service plans

A fee-for-service plan, or indemnity plan, allows you to work with any dental provider. The insurer will cover a percentage of the fee. The ability to choose your own provider is a big win for many.

This is especially true if you already have a dentist you like that isn’t available through your PPO and HMO options. But the cost of these premiums is often much higher than the other plans.

Preferred provider organization plans

A PPO, or Preferred Provider Organization plan, offers you a better price if you stick with an in-network provider. Although you aren’t required to see a preferred provider, you’ll be able to save on costs if you stick to the list.

You are able to seek care from an out-of-network provider if you want to. But you’ll have to pay more when you see them. Plus, many of these plans come with a maximum reimbursement amount for out-of-network visits each year.

With a PPO, you have the best of both worlds. You’ll have choices in your providers. But you won’t have to overpay for a visit.

Health maintenance organization plans

Finally, there are HMO or Health Maintenance Organization plans. An HMO will require you to visit dentists within their insurance network. If you are comfortable with limited providers, the cost savings of this plan are exceptional.

Before you dive into an HMO dental plan, I highly recommend checking out the list of providers. Unfortunately, the list can be very limited. Although the cost savings potential is high, you might miss out on the chance to work with a dentist you feel comfortable with.

How to get the most out of dental insurance

The decision of whether or not dental insurance is worth it will vary based on your situation. But if you decide to go with insurance, it is a smart move to think ahead. Consider asking your current dentist what procedures are on your horizon. With an idea of the type of dental work you’ll need in the future, you can seek out a plan that works best for your needs.

But of course, there is always the possibility that you’ll have an unexpected dental procedure that might not be covered. As with all insurances, keep your personal risk tolerance in mind. If you want to avoid a major expense, you might decide to go with more comprehensive dental coverage.

Once you have your dental coverage in place, take some time to pursue the directory of providers. You can seek the best dentists in your network to save on costs without skimping on quality.

What do dental services cost without insurance?

The costs of dental services without insurance will vary based on your state and provider. But regardless of where you live, the expenses can add up quickly.

Here’s a look at some of the costs for the most common dental services:

  • Basic cleaning: $75 to $200
  • Dental x-rays: $100 to $250
  • Amalgam filling: $50 to $150
  • Tooth-colored filling: $90 to $250
  • Gold filling: $350 to $4,500
  • Dental crown: $500 to $2,000
  • Tooth extraction: $75 to $800
  • Root canal: $500 to $1,500

Depending on your dental needs, these costs can pile up.

Is dental insurance worth it and should you have it?

So, is dental insurance worth it? The answer to whether or not dental insurance is worth it will vary based on your unique situation. (Kind of like renters insurance.) The only way to find out is to dig into the numbers for your particular area. Take some time to compare the costs of services in your area to the cost of a dental insurance plan.

In some cases, you might come out ahead with the basic cleanings and X-rays. In others, dental insurance premiums can cancel out the cost of savings. But you’ll need to do a little bit of digging around about the dental costs in your area to find out.

If you decide to go without dental insurance, then I highly recommend ensuring your emergency fund is fully stashed. Although you might not run into any unexpected dental expenses, you never know when you’ll need to visit a dentist for a tooth-related emergency. Need help building out an emergency fund? Check out our quick guide. 

Dental insurance can be worth it when needed!

Dental insurance can be helpful when facing major dental costs. But you’ll need to weigh the costs in your area to decide if the premiums are worth it. Remember to try to check with in-network providers to save on costs and choose the plan that's best for you and your budget.

Learn how to create a budget that includes all of your expenses (including dental insurance) with our completely free budgeting course! For more financial guidance and tips, tune in to the Clever Girls Know podcast and YouTube channel!

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What Is Credit Life Insurance? https://www.clevergirlfinance.com/credit-life-insurance/ Mon, 15 Nov 2021 20:13:17 +0000 https://www.clevergirlfinance.com/?p=15518 […]

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Credit life insurance

Have you ever borrowed money to buy a house or a car? You were probably offered credit life insurance. Credit life insurance is an insurance policy that pays off a loan in the event that the borrower passes away. Lenders usually offer it for home mortgages, car loans, and student loans. You can sometimes get it with regular personal loans, too.

It is beneficial for some, and an unnecessary cost for others. However, if you’re thinking about buying it, here’s what you should know first.

How credit life insurance works

Despite the name, it doesn’t work like regular life insurance. If you're paying off a loan and you unexpectedly pass away during the repayment period, it will automatically pay off the remaining balance.

In this case, your lender works with the insurance provider to get the money back. There is no penalty to your next of kin. Also, when you buy it, you get guaranteed coverage. Meaning, you don’t need to take a medical exam—or even answer any medical questions—to get this type of coverage.

Because it is not medically underwritten, it’s more expensive than traditional life insurance policies. The cost of it depends on how much money you borrow and other coverage details.

Is credit life insurance a requirement?

Credit life insurance is always optional. When you borrow money, your lender cannot require you to buy it. However, declining it can put your spouse or joint borrower at risk to assume your debt if something were to happen to you.

Who needs credit life insurance?

Credit life insurance is not incredibly common, and many borrowers view it as an added expense that is not worth a higher monthly payment. But in reality, it can be beneficial in some situations, because the unexpected can and does occur.

For example, a loan is not always forgiven when you die. As a result, it can be particularly beneficial for borrowers who do not want to burden their loved ones with loan payments if they were to pass away.

It can also be a good choice if a family member or friend has co-signed a loan with you. If you passed away, that co-signer then becomes responsible for the unpaid balance on the loan. However, with credit life insurance, the co-signer does not take over the payments.

When deciding whether to purchase it, also think about where you live. If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, you live in a community property state.

This basically mean married couples equally own any assets and owe any debts, regardless of who earns or spends the income. For married individuals, your spouse is responsible for your debts in the event of your death. Credit life insurance can pay off the balance of a loan so your spouse doesn’t have to.

Pros of credit life insurance

Credit life insurance offers a few advantages that may be enticing to certain borrowers. Some of the biggest benefits include:

Peace of mind

The main reason to get this type of insurance is to protect your loved ones from assuming your loan debt if you unexpectedly pass away. This provides peace of mind for you, and for them.

This is also especially important if you are the breadwinner of the household because the debt could become a big financial burden to the ones you leave behind.

No medical exam

Anyone can automatically qualify for credit life insurance because there is no medical exam and no health questions asked. That’s an important advantage if you have health problems or pre-existing conditions that could make it difficult or expensive for you to buy other types of life insurance.

Easy monthly payments

Lenders can have your premium included in your monthly loan payment. That makes it convenient for you because there is no separate insurance payment to make each month.

Cons of credit life insurance

Credit life insurance has several notable disadvantages. Before you choose to purchase this type of coverage, it’s important to think about what potential downsides it has. Here are some of the cons to consider before purchasing it:

More expensive than other forms of life insurance

With a credit life insurance policy, any borrower qualifies for coverage. That’s good news for borrowers with health conditions, but that means the cost of it is typically more expensive than other types of life insurance.

Your loan amount decreases but your premiums don’t

Credit life insurance premiums stay the same until your loan is paid off. Therefore, you pay the same amount each month even though your loan balance decreases every month.

It only pays off the loan if you pass away

The only time credit life insurance applies is if you pass away during the repayment period. If you lose your job or become disabled and are unable to work, this policy doesn’t apply.

However, there are other types of credit insurance that will cover your loan payments in these circumstances, such as credit disability insurance. This type of disability insurance helps to cover your loan payments if you become disabled and are out of work with limited income.

Do I need credit life insurance if I have traditional life insurance?

Credit life insurance and traditional life insurance, like term life or whole life, are completely different, but they serve a similar purpose—to provide financial protection in the event of your death.

Credit life insurance will specifically pay off your loan if you pass away. With traditional life insurance, your beneficiary (typically a family member) receives a fixed amount of money after you pass away, called a death benefit. The beneficiary does not pay taxes on the money, and it can be used for any purpose.

If you were to pass away with outstanding debt, your beneficiary could use the money from your life insurance policy to repay the loan if they took over your payments. However, that would lessen the amount of money available to use for other necessary expenses, like funeral costs or income replacement.

Ultimately, credit life insurance does not replace traditional life insurance. If you already have regular life insurance, credit life insurance is still worth considering. This is especially true depending on how much life insurance coverage you have, and the size of the loan you need to repay.

Consider credit life insurance if it's right for you

If you borrow money and have the opportunity to buy credit life insurance, think about the pros and cons of this type of insurance. It can be a good option if you want to protect your survivors from your financial burdens in the event of your death.

However, keep in mind that it can be more expensive than other types of life insurance. Plus, you won’t get any protection if you become unable to make the payments, such as in the event that you become disabled.

If you don’t already have regular life insurance, it might be worth purchasing a policy with enough coverage to satisfy your loan in the event of your death. That way, your loved ones won’t have to use their own savings to repay what you still owe.

Learn everything you need to know about life insurance with our completely free course! Also, subscribe to our YouTube channel and Clever Girls Know podcast for more top financial tips!

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Do I Need Credit Disability Insurance? https://www.clevergirlfinance.com/credit-disability-insurance/ Mon, 01 Nov 2021 18:09:40 +0000 https://www.clevergirlfinance.com/?p=15121 […]

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Credit Disability Insurance

If you’ve ever applied for a personal loan, your lender probably offered to sell you credit disability insurance. While it might seem like an unnecessary cost, it can come in handy if you become sick or disabled and lose your income. Most people assume they’ll never be affected by a disability, but in reality, everyone is at risk of becoming disabled.

Data shows that 5% of working Americans are affected by a short-term disability each year, and only 40% have enough savings to cover at least three months of regular expenses.

While not everyone needs credit disability insurance, some people should consider it. This article will explain what it is, what it covers, and who needs it.

What is credit disability insurance?

Credit disability insurance is an optional insurance policy that is often available when you take out a personal loan. If you become disabled, it helps to cover your loan payments while you are out of work and have limited income. If you choose to purchase credit disability insurance, there are several ways you can pay for it.

The cost might be added to the principal of your loan, which is the amount of money you’re borrowing. Paying for credit disability insurance this way can be more expensive because you end up paying interest on the cost of the insurance policy.

Another option is to pay for it in monthly installments over the lifetime of your loan. If you choose to pay monthly, your premium will decrease as you pay off the loan balance. Before you can purchase credit disability insurance, you must also meet certain requirements.

For example, many lenders only offer this type of insurance to borrowers who work more than 25-hours per week and are under the age of 70. Every lending company and/or insurance company has different criteria.

How does credit disability insurance work?

Credit disability insurance can be purchased through your lender when you take out a personal loan. If you become disabled and are unable to work, you can file a claim and ask your insurance company to cover your loan payments. There are several important things to know about it.

First, you can’t get unlimited benefits. Depending on the terms of your insurance policy, your insurance company will cover your loan payments up to a certain dollar value or over a specified period of time.

Also, there might be a waiting period until you can use your coverage. Some insurance companies will only agree to cover your loan payments if you’ve been consistently paying off your loan balance for a certain amount of time, like 90 days.

What disabilities qualify for coverage?

In order to use credit disability insurance, you must have a qualifying disability that prevents you from working in any capacity. Usually, your lender or the insurance carrier will request to see medical proof of a disability from a doctor or your employer.

While every lender has different covered disabilities, here are some of the most common ones:

  • Childbirth complications
  • Cancer
  • Physical injury
  • Arthritis
  • Heart disease
  • Diabetes

Remember that credit disability insurance will only cover your loan payments up to a certain amount or over a fixed period of time. Meaning, if you have an injury or illness that is expected to keep you out of work for six months or longer, it’s possible that your benefits will run out before you return to work.

Pros and cons of credit disability insurance

Credit disability insurance can be a life-saver for many people. However, it also has several downsides. Before you choose to purchase, it’s a good idea to consider the pros and cons to help you make a decision.

Pros

Let's dive into the pros of having this type of insurance and how you will benefit from it:

Protect your family financially

Data shows that more than half of American adults live paycheck-to-paycheck. And without a steady income, making your loan payments can be challenging, especially if you have other financial obligations. With credit disability insurance, you can continue to financially support your loved ones without assuming more debt.

Peace of mind

If you become disabled, credit disability insurance can offer peace of mind. You don’t have to worry about defaulting on your loan or ruining your credit score if you can’t afford to keep up with the payments. Plus, you can put more money towards medical bills, rather than spending that money on your loan.

Cons

We've said it before, and we will say it again there are cons to pretty much anything. Here are a couple of cons to this type of insurance:

Limited coverage

Credit disability insurance will only pay up to a certain dollar value, or a specific number of loan payments. If you are disabled for a long period of time, it’s likely that your benefits will eventually run out. In addition, there’s usually a waiting period before you can use this policy.

Potentially expensive

In terms of cost, it can be pricey, particularly if you add the premium to your loan principal. Remember, if you go that route, you not only pay for the insurance but will also be paying interest on that amount. So make sure you know how much it will cost before you buy it.

Who needs credit disability insurance?

Consider this: More than one in four 20-year-olds today will suffer from a disability at some point before they retire. With that being said, almost everyone can benefit from having credit disability insurance. Regardless of your age, health status, or occupation, major injuries, and serious illnesses can prevent you from working and bringing home a consistent income.

It can be especially helpful if you provide financial support for your family. If you’re unable to work and you’re paying off a personal loan, insurance can cover your loan payments, so you’re not sacrificing your lifestyle or dipping into your savings.

However, it is typically more beneficial if you have a long repayment period, like 60 months. If you are paying off your loan over 24 or 36 months, you could have a smaller chance of becoming disabled during that time. But at the end of the day, you choose the amount of risk you are comfortable taking.

Is credit disability insurance worth it?

Overall, the decision to purchase credit disability insurance is personal. It’s worth it for some people, and not worth it for others. But if you want the added peace of mind, it is certainly something to look into.

You might also be wondering if credit disability insurance is necessary if you have short-term disability insurance through your employer. The answer is—it depends. Short-term disability insurance replaces your income while you are unable to work due to a qualifying disability. You can use the money from disability benefits for any reason, including making loan payments.

However, the combination of short-term disability insurance and credit disability insurance gives you the greatest financial benefit. The income you get through disability insurance doesn't need to be spent on loan payments if you have credit disability insurance, which ultimately puts more money into your pocket.

Protect your finances with credit disability insurance

The saying goes it's always better to be safe than sorry. You never know what life may throw your way, so why not protect yourself with the right type of insurance. This can prevent you from defaulting on your loan and ruining your credit too. Just make sure you understand what the policy covers and how much it costs before you buy it.

Learn more about getting your finances in order with our completely free "Build a solid foundation course!" You will learn how to transform your money mindset, organize your finances, create financial goals, and make a customized budget. Also, tune in to the Clever Girls Know podcast and YouTube channel for more great financial tips and hacks.

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Is Renters Insurance Worth It? Yes! And Here’s Why! https://www.clevergirlfinance.com/is-renters-insurance-worth-it/ Mon, 04 Oct 2021 11:00:00 +0000 https://www.clevergirlfinance.com/?p=9159 […]

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Is renters insurance worth it

You may be familiar with the saying, "It's better to be safe than sorry." So with that in mind, is renters insurance worth it? If you're one of the millions of Americans living in a rented home or apartment, then it's definitely something you should consider. Renters insurance can protect you against the worst-case scenarios that could leave you in a bad financial spot.

Let’s take a closer look at what renters insurance covers and help you decide if renters insurance is worth it.

How does renters insurance work and why is it important?

So how does renters insurance work, and why should you have it? Renters insurance allows you to protect your belongings in the event they are destroyed while you are living in a rented home. Although it does not ensure the physical space against damages, it can help you to replace your things.

Of course, we all hope that nothing damaging ever happens at our home. However, it is not impossible for a break-in or other unforeseen emergency to destroy your things. These kinds of life events always seem to happen at the worst possible time.

Without renters insurance, you would be on the hook to replace all of your belongings. With renters insurance, however, you would be able to replace your damaged items without worrying about the financial strain it would place on your budget.

What does renters insurance cover?

So is renters insurance worth it? Well, the first step in helping you to decide if it is or not is to understand what it covers. Although individual renters insurance policies vary, let's go over some of the most common events covered. As you shop for your own policy, you should consider your unique situation.

1. The theft of your belongings

Unfortunately, theft from break-ins can be a problem even in the safest neighborhoods. With some policies, you’ll be able to recover the cost to replace your stolen items. This is good to have for everyone but especially for those with high-end luxury items.

2. Fire and smoke damage

No one expects a fire to happen in their home. However, many home fires happen every single year.

In many cases, a fire will destroy most of the items in a home. Without renters insurance, it could be financially difficult to replace these items at one time.

3. Falling objects and glass damage

A storm can knock falling objects directly into your home, leaving a trail of damage behind. You could be responsible for replacing your damaged items without renters insurance. The landlord will be responsible for their property but not for your personal items.

4. Automobiles or aircraft that crash into your apartment

Unfortunately, cars have been known to crash into homes and cause significant damage. Although plane accidents are generally considered more rare and planes are considered safer than cars, some renters insurance policies cover that type of damage as well.

Even though these events may be rare, you would have to pay out of pocket for your belongings. So keep that in mind to help you to determine if renters insurance is worth it.

5. Water damage

A burst pipe can lead to a flood of damage. With potentially several inches of water in your home, you can expect to replace thousands of dollars worth of belongings. Even a solid emergency fund could be stretched thin without the help of renters insurance.

6. Electrical surge damage

Although it is good practice to hook up your electronics to a surge protector, many renters insurance policies will help you replace any damaged electronics due to a surge. This can save you quite a bit of money on items such as laptops, televisions, and other types of electronics.

7. Extreme events

Volcanos, riots, vandalism, and explosions may seem like something out of a movie, but you never know what the future may hold. Most renters insurance policies cover a wide variety of other scenarios that you may not have thought of.

As you think about your current apartment, consider what events might cause damage in your area. Look for that coverage as you shop for policy options.

8. Pet incidents

Did you know that some rental insurance policies can cover medical expenses if your beloved dog were to injure someone? (Such as a bite) Sometimes things happen accidentally; even a playful nip may require some medical attention, and this will help you from having to pay those costs out of your pocket.

Unfortunately, some breeds are excluded from coverage, so be sure to research the policy details before signing up.

Common questions about renters insurance

As with most insurance policies, it is a great idea to ask questions before you choose to plan. This can help you in deciding if renters insurance is worth it. With that, let’s tackle the most common questions about renters insurance.

Does my landlord's insurance policy cover me?

Although your landlord’s policy will likely cover the cost of repairs to your apartment, it will not cover your personal items. A landlord is interested in protecting their property against damages. But their policy will not cover the items that you have in that property.

For example, let’s say a pipe burst in your apartment and flooded everything. Your landlord’s policy would help them cover the cost of repairs to the actual property.

However, it would not help you cover the cost of replacing your belongings. With that, it is up to you to find a policy that covers the replacement of your belongings.

Does my roommate’s policy cover me?

In most cases, your roommate’s policy doesn’t cover you. Unless the policy specifically covers you, then you should consider purchasing your own coverage.

Does renters insurance cover high-value items?

There is a wide range of policy options for renters insurance. With that, some policies do cover high-value items, but other policies do not.

If you are looking to cover a specific item such as heirloom jewelry or your high-end designer bag, then read the fine print of your policy to find out if it covers those items. If not, you can consider supplemental insurance for those, particularly high-value items.

Is renters insurance worth it?

So, even after knowing what it covers, you may still be wondering, "is rental insurance worth it or not?" In most cases, it can be, but here’s how to decide for yourself.

Take an assessment of your belongings

So is renters insurance worth it for you personally? The first thing to do to determine if renters insurance is worth it is to figure out the value of the items in your apartment. I recommend taking a notepad through each room in your home and writing down an approximate value of the items you see.

Nothing is too large or small to include. You may want to round your numbers for certain rooms. For example, instead of accounting for every dress and pair of shoes in your closet, come up with a reasonable number that you would need to replace all of those clothes.

Don’t forget big-ticket items such as your furniture, TV, and computer. You might be surprised to find out how valuable your items are when you add the numbers together. It is not unreasonable to assume that you have several thousand dollars worth of items in your apartment. Assessing the value of your belongings can help you to decide if

Compare renters insurance policy quotes

Once you have a better idea of what it would cost to replace your things if something were to happen, it is time to shop around for renters insurance policies. You can find policies that range from $5 to $30 per month.

Depending on the value of your items, a few dollars a month could be a no-brainer to protect your things. After all, thousands of dollars in items would be difficult for most of us to replace in an emergency.

In most cases, renters insurance is worth it. But it is a personal decision based on your risk tolerance. If you would be content to replace the items on your own tab or simply live without, then you might be able to skip renters insurance. Otherwise, you might feel better knowing that your items are protected no matter what life throws your way.

Personally, my husband and I pay renters insurance for our small apartment. Although none of our household items are particularly valuable, it would definitely be a financial burden to replace everything all at one time.

Since we have other plans for our savings, such as building a down payment for a home and growing our retirement savings, we’ve decided to pay for renters insurance. The $12 we pay each month is completely worth the peace of mind that comes with it. Consider your personal situation before making a decision about renters insurance.

Protect yourself with renters insurance

So is rental insurance worth it? In most cases, yes, because it can save you thousands of dollars in replacement costs. Renting an apartment to call home can be a fun adventure.

However, life has the habit of throwing unexpected curveballs our way. Renters insurance can help you handle the ups and downs in stride.

Renters insurance is one of several insurance policies you may not have realized you needed in the past. Take a few minutes to find a policy that works for you today!

Learn more on equipping yourself for a sound financial future with the Clever Girl Finance Roadmap! Also, subscribe to the Clever Girls Know podcast and YouTube channel to learn all about personal finance!

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What Is Personal Liability Insurance And How Does It Work? https://www.clevergirlfinance.com/how-personal-liability-insurance-works/ Fri, 30 Jul 2021 11:47:14 +0000 https://www.clevergirlfinance.com/?p=12915 […]

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Personal Liability Insurance

If you’re responsible for an accident that causes personal injury or property damage, you need personal liability to cover the cost of the damages. Without personal liability insurance, all costs would fall on your shoulders. These costs can run into tens of thousands of dollars or sometimes higher depending on how bad the incident is.

Personal liability coverage may help decrease the cost of covering the damages to a person or property. It won’t cover 100% of the damages, but it can decrease the total amount of money you must pay out of pocket, typically limiting your out-of-pocket costs to your deductible.

In this guide, we’ll help you understand how personal liability insurance works and when you should include it in your insurance portfolio.

What is personal liability insurance?

Personal liability insurance is coverage you can add to your homeowner’s, renter’s, or personal auto policy. You can also buy a standalone policy if you don’t have any assets to insure, such as a house or car.

Personal liability coverage pays for damage to other people or properties caused by you. For example, you have friends over for dinner, and one falls on the steps leaving your house. Your personal liability coverage would help cover the cost of the medical bills and any other damage that may have occurred.

Most policies include $100,000 in personal liability coverage. Still, you can buy additional coverage or buy an umbrella policy that covers additional personal liability in cases where you may experience a high loss.

How does personal liability insurance work?

Personal liability coverage is a part of many insurance policies, or you can add it to many policies. Just because you have personal liability insurance on your home doesn’t mean it only covers liability at home though.

It can cover incidents outside of the home that other insurance doesn’t cover. For example, it wouldn’t cover a car accident since your car insurance should cover it. But it may cover damage you caused to property while riding your bike.

If the incident or the damage you caused is terrible enough that it goes to court, your personal liability policy may cover the court costs, lawyer fees, and settlements you and the victim agree on outside of court.

What does a personal liability policy cover?

Like most insurance policies, personal liability policies don't cover everything. The common exclusions include:

Now that you know what a personal liability policy doesn’t cover, let’s look broadly at what it covers:

  • Bodily injury caused by you or your pets
  • Bodily injury occurring at your residence
  • Property damage caused by you or a covered family member

How personal liability insurance works together with other policies

If you have personal liability coverage on specific policies, but they have limits, they can work together with umbrella policies. Here’s an example: The mail carrier falls on your steps and hurts his back. He needs surgery and is out of work for six months.

The total damage is $750,000. The coverage for personal liability on your homeowner’s insurance is $100,000, and your deductible is $2,500. After you pay $2,500 out of your pocket, your home insurance company will pay $97,500, leaving you with $650,000 in debt to cover.

However, if you have an umbrella policy, it will pick up the difference between what your home insurance will pay and the total cost of the damages.

Where to sign up for coverage

You can sign up for personal liability coverage with many different insurance policies you may need. For example, if you own a home, you need homeowner’s insurance because most lenders require it. Your home insurance policy may include personal liability coverage. Pay close attention to the limits, though.

Generally, home policies have $100,000 limits. However, you may be able to pay for extra coverage if you feel that’s not enough. You can also add personal coverage policies to your renter’s insurance or dwelling policy. It’s usually a part of the policy but always read the fine print since no two insurance companies have the same coverage options.

If you don’t own a home or rent one, you can buy a policy to cover personal liability as a standalone policy. The insurance companies you’d contact for other insurance policies, such as home or car insurance, also sell policies for personal liability. Like any policy, shop around to ensure you’re getting the right amount of coverage at premiums you can afford.

Some insurance companies also allow you to add personal liability coverage to a personal auto or watercraft policy. Suppose you want an umbrella policy for higher coverage amounts or ensure you and your loved ones are protected. In that case, you can also buy an umbrella policy from any insurance agent.

Again, read the fine print and ensure the policy covers what you need to avoid unpleasant surprises.

Get protected with the right policy

All liability insurance policies have exclusions, and personal liability insurance is no exception. Make sure you know what a policy does and doesn’t cover and compare it to your lifestyle to ensure all situations you may find yourself in are covered. Talk to your local insurance agent to find out what options you may have.

If coverage for personal liability is included in your home insurance policy, make sure it’s enough coverage for what you think you need.  Even if you think you don’t have any personal liabilities, consider at least a small policy.

Unfortunately, anyone who leaves their house can find themselves liable for damage to someone or something. Whether you have kids, ride a bike, drive a car, or own a house, it's essential to get a personal liability policy. Having coverage to protect your finances is crucial, so you don't find yourself in a difficult financial situation.

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The Importance Of Life Insurance For Women https://www.clevergirlfinance.com/the-importance-of-life-insurance-for-women/ Fri, 15 Jan 2021 10:53:18 +0000 https://www.clevergirlfinance.com/?p=10464 […]

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Life Insurance for Women

As a woman, typically, your natural role is to be the nurturer and caregiver for your family. Caring for your spouse, children, parents, and being a confidant to friends while being a boss entrepreneur or corporate leader. Women play a vital role in the day-to-day operations of their families. This makes having the right type of protection via life insurance very important.

Why life insurance is so important for women

Life insurance for women is a crucial part of financial planning for the whole family. Imagine the matriarch of your family becoming ill or passing away. A tragic event will not only result in an emotional loss but a substantial impact on the operations of the household as well as the finances.

The impact of being a wife, mom, caregiver, and so many other hats women wear can take a toll on your body. While an illness or tragic event is never a happy topic to discuss, it is very important to ensure you have the right plans in place. Especially if you are a contributor to your family income or the sole provider.

If you are single, life insurance can help pay off your debts, taxes, medical bills as well as offset expenses your family may incur. If you are a caregiver, single parent, or a working mother, life insurance can help buffer the loss of your income.

It can also support future expenses for your children or family. Considering these factors, women should seriously consider investing in life insurance that offers living benefits.

Don't underestimate your worth

A common mistake when it comes to life insurance for women is underestimating their worth, aka not having enough coverage. Whether you are a female breadwinner or a stay-at-home mom, you need to ensure you have insurance coverage for your family's financial needs.

In a survey, 79% of men say they had life insurance, while only 67% of women had life insurance. The amount of coverage difference in life insurance for women versus men was a whopping $191,670! This is a huge amount that could be beneficial to your family if something were to happen unexpectedly.

Of course, everyone's financial situation is different. Determining the amount of life insurance you should have can be a challenge. Don't assume you need to pay for a million-dollar life insurance policy to have enough coverage. it might be much less. One of the most recommended methods is known as "The dime formula."

This formula has you take a more detailed approach to your finances. It has you consider your total debt, final expenses, mortgage payoff, and the cost of education for your children. Similar to creating your financial plan, you will need to plan out precisely what type of coverage you should have.

Deciding between term life and whole life insurance

When it comes to determining what life insurance will work best for you, it's all about your unique needs. There are two main types of life insurance and they are term life insurance and whole life insurance.

Whole life or permanent life insurance

Whole life or permanent insurance is a type of life insurance that combines life insurance with investments. This addition of investments is called "cash value" and is placed in a cash-value account.

Term life insurance

Term life insurance covers is a type of life insurance that covers you for a specified number of years and has no cash value account associated with it. As a result of this, the premiums are often lower than a whole life policy.

What about living benefits?

Living benefits can be part of your term life or whole life insurance and provide coverage while you are living in addition to the death benefit.

This key benefit is a lifesaver for many families who experience a terminal, critical, or chronic illness and require steady income to cover expenses. This is where living benefits kick in to provide supplemental income to the insured. Living benefits can provide coverage in three major categories of illness.

Terminal illness

An illness that will result in death in 24 months of diagnosis by a physician.

Critical illness

Examples of critical illness include ALS (Lou Gehrig's disease), Heart Attack, Stroke, Cancer, Blindness, Sudden Cardiac Arrest, Major Organ Transplant, etc.

Chronic illness

Chronic illness is when a doctor has certified, within the past 12 months, that you are unable to perform 2 out of 6 "activities of daily living" for a period of at least 90 consecutive days without assistance or you are cognitively impaired.

At the end of the day, you want to protect yourself and your family with the right life insurance. It's also important to be aware of the advantages and disadvantages of life insurance. You want a plan that ensures you are all well taken care of in the event of illness or a tragic accident.

Budgeting your life insurance policy

As with any expense, you want to be sure you budget for the cost of your life insurance policy. This is a necessary expense, and if it means cutting out other unnecessary expenses to cover it, you should do it.

Again the cost of life insurance for women will vary based on age, health history, occupation, policy type, etc. Remember to speak with an agent to ensure you get the best policy that fits you and your family's financial needs.

When should you invest in life insurance?

Investing in life insurance is best done while you are still young and relatively healthy. The older you are, the higher the risk class you could be placed in. This impacts the cost of how much you will pay for insurance.

Once you invest in life insurance, be sure to make the people you trust, and you want to protect aware that it exists. This way, they know it is available in the event of an illness or death. For instance, your spouse and your children (and even your estate lawyer as part of your estate plan).

When is the best time to buy life insurance for women?

When it comes to life insurance, regardless of gender, it's best to purchase a policy you can afford at a younger age. This is because life insurance premiums are the lowest when you are younger.

However, if you are older and also in good health, depending on the underwriting process, you can shop around to get the best possible rates based on your age. If you are thinking about life insurance, the next best time to buy it is today.

Life insurance for women is important!

As opposed to looking at life insurance as an expense, consider it an investment to protect your life. When it comes to life insurance for women, it should be just as important as auto, home, and/or renters insurance.

If I can offer any advice to women, it would be to value your life just as much as you value others and get insured.

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10 Types Of Insurance You Need But May Not Have https://www.clevergirlfinance.com/types-of-insurance-you-need/ Wed, 06 Jan 2021 13:49:40 +0000 https://www.clevergirlfinance.com/?p=10334 […]

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Types of insurance

Most people are familiar with some of the different insurance policy types. Are you a car owner? Then you know you need to carry coverage to be on the road. Ever borrow money to buy a home? Your lender likely required you to get homeowner's insurance to protect this big purchase.

While these may seem like enough, the truth is there are other types of insurance that you should consider to adequately protect yourself and your future income. We'll go over nine of them, but first, let's talk about why insurance is so important.

Why is it important to have insurance coverage?

Think of insurance as protection for your wallet. Having the right types of insurance has many advantages and can potentially save you a ton of money. Especially in the event of an emergency, unplanned life occurrence, or a medical need. Car insurance can pay for the costs of a car wreck, like repairs and medical bills.

A homeowner's policy can help you rebuild your home after a devastating fire. Health insurance can pay for expensive emergency room bills after an injury or illness.

In exchange for paying money (premiums) to an insurance company, you get coverage. It means you can protect yourself without having to impact your long-term financial plans. Not having enough insurance policy types can derail your financial goals, and you definitely don't want that.

Before you start signing up for any additional insurance coverage and adding new premium payments to your budget, you need to make sure that the insurance policy types make sense for your life situation.

You also want to make sure that the additional monthly costs are justifiable. You don't want to be making monthly payments for insurance coverage if you don't necessarily need it.

Check out these nine types of insurance you may need — and that you might not have considered otherwise.

1. Life insurance

Life insurance is something to consider if you have other people who depend on your income, such as a spouse or children. This policy is vital if you have large financial commitments such as a mortgage, child education expenses, or any major debt. Sometimes you even need a policy if you're getting a small business loan.

The purpose of life insurance to provide a lump sum (and usually tax-free) payment to your dependents in the event of your death. How much life insurance you buy is a personal decision. Generally speaking, it depends on the number of years of income you want to cover for your household after you've passed away.

The two most popular insurance products you'll come across are term life insurance and whole life insurance:

Term life insurance

Term life insurance, as the name indicates, only covers you for a specific term or a number of years (e.g., 10, 20, or 30 years). As long as you pay your premiums and keep your policy active, your beneficiaries should get a lump sum in the event of your death.

If you outlive your policy term, the coverage expires, and you can either renew (if offered) or apply for a new policy. The premiums can be affordable, but they get more expensive as you get older.

 Whole life insurance

Whole life insurance coverage lasts your entire lifetime as long as you keep up with your premium payments. It may also offer cash value benefits like a form of savings or investment account associated with it. Over time you may get money credited to you. While this type of life insurance sounds attractive, it is also substantially more expensive.

Regardless of what type of life insurance you choose, you want to make sure you fully understand what is associated with each, how much coverage the premium provides, and if there are any conditions or requirements. Check out our article on if you really need a million-dollar life insurance policy!

2. Long-Term Disability Insurance

This insurance covers you by replacing your income if you're unable to work due to a permanent or temporary disability. Regardless of whether you have dependents or not, if you have monthly living expenses, then it's a good idea to consider getting disability insurance.

What about short-term disability insurance? Well, if you have a fully-funded emergency fund, then it could cover you if you can't work for a little while but it may not be enough. Adding on short-term disability might not be a bad idea depending on the cost — especially if your employer offers it at a low cost or free. It can help you keep your emergency savings intact in exchange for the monthly premium you pay for coverage.

3. Renters Insurance

If you're renting, you're not responsible for the building itself or major repairs. That's your landlord's responsibility. That being said, you definitely want to consider getting renters insurance to cover your valuables within your home.

Renters insurance protects you if your belongings get damaged by flooding, fire, or in the event that your home is broken into. This is also why it's a good idea to keep an inventory of your stuff — like your expensive electronics or musical instruments — to know how much protection you actually need so you're not overpaying.

Your electronics and other valuables are the things that your renters' insurance would cover. Renters insurance also covers items stolen from your vehicle, even if it's parked away from home.

4. Personal Article Insurance

Do you have an expensive engagement ring or wedding ring set? An expensive watch? A laptop you take with you everywhere? The costs of replacing items like this can be really expensive. If you have any personal items that are of value and you often have them outside of your home, you should definitely consider insuring them through a personal articles policy.

You may even be able to add a floater to an existing policy to cover valuables like jewelry (ask your renters or homeowners insurance company). This will ensure that you can replace them without having to incur any major financial setbacks in the event they get lost or stolen.

5. Pet Insurance

60% of Americans have a pet of some kind, and many times people don't consider the associated medical costs with bringing home a pet. Pet parents should expect to pay $800-$1500 for an emergency vet bill.

Pet insurance can save you a lot of money if your pet needs major surgery or has expensive medical care, so it is definitely something to consider. Talk to your vet to see which policies are accepted at their office before buying any coverage.

6. Homeowners insurance

Financial institutions require you to have homeowners insurance. However, you absolutely should have homeowners insurance even if you own your home outright. Homeowners insurance protects you if your home is damaged or destroyed.

This policy includes dwelling insurance, which covers the amount it would take to rebuild your home. Homeowners insurance can cover your personal belongings and include liability insurance if someone were accidentally injured on your property.

Review your policy thoroughly to ensure you have the correct types of insurance in place. For example, flood insurance is excluded from most homeowners insurance policies. Invest in a flood insurance policy to prevent major expenses in the event of a flood.

Other types of insurance, such as earthquake coverage may not be included either. You should speak with your agent to ensure you are properly protected. And be sure to explore ideas to potentially lower your homeowner's insurance cost without sacrificing coverage.

7. Identify theft protection

The odds of becoming a victim of identity theft is very high. Identity theft is when someone uses your personally identifying information to commit fraud or criminal acts. There are various types of identity theft, such as:

  • Bank account theft
  • Tax identity theft
  • Medical identity theft
  • Criminal identity theft

Identity theft insurance protects you by covering the costs of identity theft. This insurance can save you hundreds to thousands of dollars along with countless hours fixing your identity theft case.

8. Long term care insurance

One of the most essential types of insurance is long-term care insurance. None of us want to think about not being able to take care of ourselves, but we need to prepare in advance. Health insurance does not cover the types of services that long-term insurance covers. This policy covers costs such as assistance with daily activities and if you have a chronic medical condition.

For instance, if you were to need help bathing, using the restroom, etc., this would be covered with the policy. It's important to purchase long-term insurance sooner than later because it's one of the types of insurance you may not qualify for once you have a condition.

9. Umbrella policy

Depending on your situation and the protection you desire, you may want to purchase an Umbrella insurance policy. This policy is a personal liability policy that protects you if the costs are more than your homeowners and auto insurance coverage.

For instance, if the cost of the incident were $25,000, and your policy only covered $15,000, then the Umbrella insurance would cover the remaining $10,000 of expenses.

Without this type of insurance, you will pay the remaining expenses out of pocket. Remember liability insurance policy types protect against damage to other people and property. You still need to have other types of insurance in place to protect your property and assets.

10. Dental insurance

Dental insurance is one of those insurance types people don't think about until they are in pain. If you have a history of dental work or have young kids with growing teeth, dental insurance is certainly worth the consideration. Even if only for preventative care.

However when it comes to determining if dental insurance is worth it for you, be sure to weigh the various cost and coverage options out there.

Choose the types of insurance best for your situation

Bottom line: Make sure that whatever additional insurance coverage you get makes sense for your life situation and that the monthly cost for coverage fits into your budget.

The potential payout from an insurance policy should far outweigh the cost you'll be paying to have the coverage over time. By having the right types of insurance you can prevent financial mishaps and protect your assets!

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