Life Insurance Policy – The What, Why and How Of A Life Insurance Policy

A life insurance policy could help you to provide your family with financial security when you die and can no longer look after them. In this article I will discuss the what, why, how, when and where of a life insurance policy. If you are wondering about getting life insurance, then you may want to read this.

What is a life insurance policy?

A Life insurance policy is a contract between an insurance company and the insured which promises to pay out a certain amount to your beneficiaries in the event of your death.

It also sets out the provisions of the life insurance coverage. These provisions include premiums, loan procedures, face amounts, and the designation of beneficiaries, among many other clauses.

Policies may be for term or permanent cash value types of coverage.

Why is a life insurance policy essential?

The benefit from a life insurance policy is not for you. It is to provide for your loved ones, but after you have gone.

After your death, the life insurance money is paid to those who rely on you to give them a secure standard of living, which they might lose if you should die. This is money when they need it the most, with no income tax or publicity.

How does a life insurance policy work?

Term life insurance is only for a certain period of time, and if the policyholder dies during the term of insurance he/she receives the death benefit. In the case of the insured person dying after the policy expires, however, no benefit is paid.

At the end of the term period, the policy expires with no accumulated cash value, and no benefits are payable. Term is the cheapest, but it’s unlikely the death benefit will be paid since the life insurance policy will probably lapse before you actually die.

When a person has family and becomes ill, not only does the sick person need support, but also the family often requires relief. Short-term income protection is an added coverage to life insurance and provides extra cash to cover the family’s needs when one spouse is ill.

You will need to decide on the amount of term life insurance before you start to shop around. Most companies have effective savings rates at $250,000, $500,000 and $1 million.

When can you take out a life insurance policy?

You may be able to get a lower premium for your insurance if you have lowered your cholesterol, lost weight or quit smoking.

A 35 year old nonsmoking male in excellent health can buy a $500,000 term life insurance policy for about $700 per year.

Keep in mind your age determines the length of time the term policy will have a guaranteed level premium. You may not be able to get more than a 10 year guarantee if you are over 50 years of age, so start while you are still young.

Where can you find a life insurance policy?

Finding a life insurance policy is something that you should not rush into.

If you are planning to apply directly for life insurance, then you may find it easier to apply online. All this information will enable you to make the right decision about the best company to get your most suitable life insurance policy from.

Getting online term life insurance quotes can be a very effective and convenient way to save you both time and money when shopping for term life insurance. The quotes are free and you’re never under any obligation to accept any quote that is offered to you.

Decision By Regulators May Have Big Impact On Mortgage Rates And Products

A decision by government regulators on an obscure issue next month could have a big impact on mortgage rates and home loan products available to borrowers.

Under the Dodd-Frank Act that overhauls regulation of the country’s financial system, mortgage lenders must share losses on their loans. But if their mortgages are deemed safer “qualified residential mortgages” they don’t have to have their skin in the game.

Mortgage products that don’t fall into the qualified residential mortgage category will probably have higher mortgage rates and tougher qualification standards for borrowers.

Congress, which typically doesn’t get into the details of the laws it makes, didn’t define a qualified residential mortgage. Instead, it left it up to regulators, who are now grappling with the issue.

Regulators, expected to reach a decision next month, have been getting an earful from lenders, investors and housing advocates on how to define qualified residential mortgages. Most groups agree to exclude the riskiest mortgage product like negative amortization loans, but beyond that, they disagree on what to call a safe mortgage.

Regulators have a lot to think about. Take down payment amounts, for instance. A recent article by MarketWatch says large banks want a large down payment requirement of 30 or 20 percent. Small banks want a small down payment requirement of about 5 percent, and housing advocates want to allow even smaller down payments of 3 percent.

Credit scores, income to debt ratios, length of employment, and the amount of documentation are some other factors to consider.

Depending on the regulators’ ruling, many mortgage products or just a few will be defined as qualified mortgages and be exempted from risk sharing requirement. Criteria that are too strict will risk barring many borrowers from low mortgage rates, but if guidelines are too loose lenders might be free to again make risky loans.

When the real estate market bubble was building, some mortgage lenders gave risky, exotic home loans to borrowers, then bundled the mortgages into bonds that were sold to investors who took the hit when borrowers defaulted. The theory is that lenders will be more cautious about making riskier loans if they retain part of the risk, or have skin in the game.

In addition to bank regulators, the Treasury Department, the new Financial Stability Oversight Council and the new Consumer Financial Protection Bureau will be involved in creating the rule.

Different Types Of Loans Available

There are many different types of loans. The best type is dependent on the needs, financial status and credit of the borrower.

Home Loans

Conventional loans are offered by mortgage lending institutions. This type of loan might even be backed by a government agency such as the Federal Housing Administration or the U.S. Department of Veterans Affairs. This loan is effective for an individual interested in purchasing a home.

Payday Loans

Some online cash loans are also referred to as payday loans. The borrower writes a check or authorizes a debit from their bank account, to be cashed by the lender on their next payday. The finance charge and the loan must be paid simultaneously. The borrower can have the lender cash the check, pay back the loan in cash or pay the finance charge to extend the loan until their next payday. This type of loan is intended for individuals requiring cash quickly and is not intended to be used for the long term.

Installment loans

An installment loan is repaid on a set schedule over a specific period of time. The actual number of payments will vary according to the terms of each one. The term can be for only a few months or for a period of years. These are alternatives to payday loans since the repayment is structured and not a lump sum in a relatively short time frame. You can even apply for a cash loan online, which makes the process more convenient.  The credit rating of the borrower usually impacts both the interest rate and term for this type of loan.

Secured Loans

This type of loan requires property to be used as collateral to obtain the loan. If the borrower does not pay back the loan, the lender takes possession of the collateral. The amount of the loan and the interest rate are dependent on the value of the property used for collateral or leverage. The credit history and length of the terms are also considered. This type is usually secured with a house, vehicle, property, CD or savings account. This is an excellent way to finance a new business, make home repairs, purchase expensive equipment, pay medical bills, etc.

Unsecured Loans

An unsecured loan does not require any collateral. The income and credit history of the individual determine the size of the loan and the interest rate. This type of loan is also called a signature loan or a personal loan. This is a nice option for anyone with excellent credit and a good income. The funds are used in much the same way as with a secured loan.

Open-Ended Loans

This type of loan provides the borrower with a line of credit with a fixed limit. Once the funds have been repaid, the individual can continue to borrow money from the loan. The best example of an open-ended loan is a credit card. This type of loan can be used for anything from small purchases to major home repairs.

Close-Ended Loans

Once this type of loan has been repaid, the borrower cannot continue to borrow money. A few good examples are car loans, mortgages and student loans. Every time the borrower makes a payment, the loan decreases. This loan is intended for providing a specific amount of money one time only. A new loan must be approved for the borrower to obtain any additional funds.

The Home Equity Line of Credit

This is an option for homeowners only. The equity in the home is used to provide a line of credit. Once paid, it can be used over and over. This is a popular option for home renovations.

Given the above examples, it’s easy to see that borrowing money to cover bills and purchases isn’t limited to going to the bank. Here in the 21st-century, applying for a loan is as close at the nearest computer.

Beneficiaries Of Lost Life Insurance Policies Can Really Use The Money

It is just a shame that money owed to some beneficiaries of lost insurance policies never get to them during their lifetimes. I spoke with some representatives of insurance companies, to see how many, on a daily basis, get phone calls from the public, asking them to search their database for insurance policies. I had one company say 100’s a day. I had another company tell me 1000’s a day and they even elaborated that it was a total waste of the consumer’s time as well as resources and man power of his company. He said that they will never find it if they do not know which company their loved one bought it from. Well, I took this opportunity to explain the need of a central life insurance database to him; telling him that it is a safe and a much needed service. He listened to me for around 10 minutes while I explained the many benefits a central database could have to his insurance customers. Even with him telling me that it was a waste of time for anyone calling his company, he did not want anything to do with the thought of a database. He flatly told me that he did not feel a database was a benefit to his customers, I was surprised.

Now as a insurance agent myself, I took offense to this comment. Isn’t it the responsibility of the agent (regardless of the company they work for) to do what is best for the customer? Don’t you think that registering anyone with life insurance on a central database so their beneficiaries can locate the company name is the best thing for the customer? Well I do. Not only does a database allow an individual to register the company name they have insurance with, it allows the beneficiary with certainty to find the policy you have in place. All an individual would need, to find a life insurance policy, is the company name. Since there are over 2000 life insurance companies in the United States alone, having the company name on a central database will solve a major problem that gets recognized only when it is too late; lost life insurance policies. Hopefully consumers of life insurance will also recognize the need and buy it from agents and agencies that offer to register on a free central database. It is definitely something to think about.