All Life Insurance Tips

How does life insurance work?

I'm a 21 year old college student. I know that I'm young, but we all know how bloody unpredictable life can be, and I wan't to ensure that my family wouldn't be financially burdened. I have about $40,000 in private loan debt, and my co-signer would most likely have to make 48 consecutive payments before they could even request a cancellation of my loans. My question is, how does life insurance work in America? And which firm should I consider? Thank you!

Public Comments

1. term life is just the protection whole life builds a savings account, too but - for the money - get the term and put the savings account into a ROTH IRA (the insurance co will make 3-4x what they give you back at age 70 with whole life) the younger you get term - the lower your start up costs with your better health - e.g. I have diabetes and I am now frozen out of cancer policies. the only way to get 'better' insurance was to change jobs and get open enrollment upon entering the new employer scheme best of luck
2. Life insurance is protection against dying too soon, leaving unsatisfied obligations. Classically, it is bought by a breadwinner to protect his family in the event of his death, but you have an excellent case for having some. There are several different kinds: - Term insurance, sold for periods of one year on up. You pay the premium, and the beneficiary collects if you croak. At the end of the period, you start over. Because the risk of death increases every year that you age, the premium for a new policy will increase every year, although if you buy a multi-year term policy, you can get one with level premiums. - Cash value insurance. Costs more than term, but builds up a cash value which can be borrowed against, used to pay future premiums, or for other purposes. Usually has level premiums; the difference between the large early premiums and the small risk of payout is where the cash value comes from. Can be arranged so that after a certain number of years, the cash value completely pays for the future cost of the policy. What to do? I recommend term insurance because it's cheap. If you invest wisely, you will make more money on your investments than the insurance company will make for you, especially if you are investing in IRAs, 401(k)s, or other tax deferred vehicles. How to do it: contact a few insurance companies (there are lots of ads), and compare policies and premiums. It is a highly competitive business, as you can imagine. Further study: I highly recommend Ayres' Mathematics of Finance, in the Schaum outline series. It has a mortality table in the back which is too old to be useful; get a better one on line from the IRS, Pub. 1457. Don't print the whole thing -- it runs 700 pages; just find the commutation tables for 3% and use those. That's a reasonable rate for after-inflation yield on investments.
3. Term Life is what you want and it is just insurance without all the bells and whistles of added features. It's insurance, and only insurance, plain and simple. They way it works is simple. If you die, then the beneficiary gets the face value of the policy. Suicide is excluded, but only for the first two years the policy is in force. Getting term life means that you will need an exam to determine your health status. But don't worry, you don't have to pay for this. It takes about 6 to 8 weeks to be finally approved for the insurance. And stay away from whole life insurance. The only time whole life insurance is good is when your health is so bad that no one will insure you for term life.
4. You pay a small sum to keep a contract in force that will pay a large sum in case of your death. It's a displacement of risk. It sounds like you should also consider disability since your chances of being sick or hurt for more than 90 days are greater than your chances of dying before age 65.
5. Life insurance is designed to protect a family against the financial burdens that accompany the sudden, unexpected loss of a breadwinner. In your case, you are concerned about leaving your family saddled with debts should you die prematurely. This means you have specific goals. The fact that you are young means you will qualify for some of the very lowest rates available. Before you buy life insurance, though, check with your lender (if you haven’t already done so) to see who is obligated to pay back the loans if you die. If your family is liable for your debts, then you have two options: term life and whole life. Term life covers you for specified amount of time, or term. How long do you think it will take you to pay back your loans? If it’s 20 years, then you could take out a term policy for 20 years in the amount of your loans (plus a little extra for funeral expenses, if you like). For a small monthly premium, you will be assured that your debts will be paid in 20 years. The money you spend on your term life will be gone, however, when the term is up. You have purchased security, but that is all. If you get a whole life policy, the insurance company will invest your premiums and your policy will build cash value over the years. A whole life policy will never expire, as long as you continue to pay your premiums. If you live another 20 years and one day, you will be covered after a term life policy has expired. If you live to 80, you will still be covered. At some point, your cash value can be used to make premium payments for you, to keep the policy in force. A whole life policy is more expensive, but you are young and should get a good rate. Some people say you could use the premium savings of a term policy and get a better return on your money. That may be true, but be realistic: Would you really invest the premium savings? To find out more, go here: http://www.lifeinsurancewiz.com Good luck!