Meet Mark and Stephan. They just found out they’re having a baby girl named Maddie. They’re very excited. However, they’re also a little bit worried, Stephan especially. As the sole breadwinner, she fears for the baby’s feature should she die unexpectedly. Luckily however, there is a ready-made solution for this problem: life insurance. Like most types of insurance, life insurance reduces the costs associated with a risk, in this case the risk of dying, in return for a monthly fee called a premium.

 

While that sounds rather morbid, basic life insurance policies only cost about $400 per year, plus their benefits are too good to pass up. If Stephan is insured and dies before her time, her insurer will pay her family a huge sum of money, like $500,000, to secure their future. Sounds pretty good right? But do most people actually need life insurance? Well, it depends, but the rule of thumb here is simple:

 

if you have someone dependent on your income, you need life insurance, otherwise, don’t bother. But let’s continue. There are two major types of life insurance: term and permanent. Term life insurance is the simpler, less expensive form. In return for a series of monthly premiums over a set period of time, generally between 10 and 30 years, Stephan’s family is eligible to receive a large payout upon her death. In contrast, permanent life insurance is way more complicated and has three similar, but distinct forms: whole, universal, and variable. Under any of these plans, some of premium goes towards establishing a death payout, just like in term life insurance, while the rest of your it, minus expenses, is saved in a tax-deferred account that earns a fixed amount of interest per year.

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As the name implies, permanent life insurance plans also last indefinitely, so if you choose to cancel, you’ll get back your saved premiums, plus your interest, after paying some fees and income tax. Sounds pretty good right? Well, actually, permanent life insurance is a pretty bad product. Stephan is stunned. Why is that? Well, beyond a reputation for being overly complicated and laden with hidden fees, think about it in terms of return on investment. With term life insurance, although your premiums aren’t invested, they’re far cheaper than permanent life insurance. This frees up cash that you could then invest with a robo-advisor for an investment return that will exceed anything you’ll get with permanent life insurance.

 

And don’t worry, we teach everything you need to know in our two videos “How to Invest” and “401(k) and IRA 101”. Hopefully you, Stephan, and Mark now have a better understanding of how life insurance works. Be sure to watch our next video, which teaches you how to actually get life insurance, and to check out our website, where you can find more educational material and great life insurance recommendations.

 

Meet Stephan. She’s is about to become a first-time mother. She’s very excited. Stephan has watched our first video “Life Insurance 101”, so she understands the importance of getting life insurance. Unfortunately, she has no idea where to start. What should she do? Well, her first step is simple: shop around for the best life insurance plan. To do this, Stephan can either go online and manually get quotes from insurers, contact a local insurance agent, or use our prefered website to easily compare insurance quotes from the best providers.

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Regardless of method, once Stephan selects a plan, she’ll have to submit an application that provides basic information to the insurer, such as employment status, proof of income, and a release for the insurer to review her health records. After that, an insurance representative will contact her to schedule two things: a phone interview and paramedical exam. During the phone interview, the representative will typically ask Stephan questions about her hobbies, lifestyle, and health history. Xem them chuyen phat nhanh di My Viexpress tai day: https://viexpress.vn/gui-hang-di-my

 

During the paramedical exam, which generally takes place either at home or at work, a trained medical professional will take Stephan’s basic vital signs, as well as a blood and urine sample. Once those two tasks are completed, assuming that everything else is in order, an insurance underwriter will look at Stephan’s application and approve her. Now that Stephan understands how life insurance works, and how to get it, as long as she follows these six rules, she should be set for the future.

Rule 1: Determine if life insurance is really necessarily. Unless you have a dependent, you really don’t need it.

Rule 2: Don’t get permanent life insurance, whether it’s whole, universal and variable. Instead, get “level premium” term life insurance, which is far cheaper and gives you a locked-in premium for the rest of your term. For more details, be sure to check out first video “Life Insurance 101”.

Rule 3: As a rule of thumb, target policies worth at least five to ten times your income, and consider insuring your spouse. For a more exact calculation of your family’s insurance needs, be sure to check out our recommended calculator.

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Rule 4: Read the fine print of any life insurance plan you are considering, don’t just pick the one with the lowest premium.

Rule 5: Only get life insurance from reputable providers with excellent credit ratings. If that sounds confusing to you, don’t worry, our recommended website does this screening process for you.

Rule 6, the final rule: Once covered, be sure to teach beneficiaries of your policy how to file a claim. That way, in the event of your death, your family knows how to get the death payout. Congratulations! You have finished the life insurance basics curriculum! If you want to see our free recommendations for life insurance plans, or just check out more educational material, be sure to check out our website!

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