Many children who are now grown adults are wondering if it is a good idea to take out a life insurance policy for either one or both parents. In the case of their passing, the coverage could be left to the children and the grandchildren.

The two main concerns and emotional responses that come up are of a financial and moral nature. From a financial aspect, some parents might only be in their sixties and still have an abundant life ahead of them. The person taking out the insurance policy would have to be willing to pay it for the next 25 years or more.

From a moral standpoint, children might feel as if they are pushing their parents into the grave, so-to-speak, or that the action of taking out a policy is selfish and self-serving. In addition, if the parents or parent are surviving on a low income budget, it could be that the money would be better spent caring for them during their living years, taking care of issues like healthcare and long term living assistance.

Regardless, you must find some solid ground between financial and moral balance that gives you the peace necessary to feel like you are making the correct decisions.

This is definitely an issue that takes careful consideration, and at the end of the day be sure to follow your heart as well as your head. Consider this: Is your parent (or are your parents) in full agreement with the plan? Maybe the parent had always hoped to have this kind of plan, but due to financial constraints could not bring it into fruition.

If the parent welcomes help for this sort of thing and it has even been on his or her mind, it might be a good decision.

As for the feeling that one is “gambling on their parents’ death,” ask yourself if the sole motivation for considering such a plan is indeed for your own monetary gain. If this is the case then there are definitely opposing forces at work. If your mind is preoccupied with wanting a claim, how can it be focused on loving the life that is?

If there is a case where the parent is in declining health but is still able to acquire a life insurance policy, then the situation looks pretty lucrative financially, but who would want to capitalize and speculate on the death of any person, let alone their own flesh and blood?

As a result, it’s no surprise that many people would feel a little shady taking out a policy under those circumstances, but sometimes it is necessary to pay for expenses that will pop up after death. In addition, keep in mind that if a policy is being taken out on a person who still has a great 25 years ahead of them, financially this is often not a wise investment.

At best, the idea of putting the money that would go towards a life insurance policy into savings instead, especially for a parent who is not so well-off financially, is a plan that is both financially and morally rewarding. This money could provide comfort to a parent (or parents) whose finances have gotten out of hand, while saving this money in advance can also help you be prepared to rise to the occasion and help out if necessary with very little financial strife. In addition, if the money never has to be used, it could always be invested differently in the event of the parent (or parents) passing.

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Permanent life insurance plans accrue money that is set aside into a savings account. The money can then be used as an asset to obtain a loan. These types of loans do not actually have to be paid back, but can be if so desired. In the case that the loan is not repaid, the amount is deducted from the policy, which in turn reduces the death benefits. Obtaining a loan against your life insurance policy is distinctly different than withdrawing funds from an account, and insurance companies may even charge interest on it. Loans obtained against policies can still cause the dividend earned on the account to be affected.

In many cases it is possible to borrow as much as the cash value of your policy. These loans come with interest rates that vary widely and there may be unexpected fees accompanying the borrowing process. Some policies are more ideal for borrowing than others.

In paying back the loan, if your payments are not high enough to cover the owed interest, it will then be attached to the loan and go on accruing at a high rate. Should the cash value of an account go over its amount, the policy will lapse at some point. To avoid this, devise a schedule for paying the loan back, so that you can keep the policy and still have the death benefits go to your beneficiaries. In many cases the amount of the loan’s interest is exceeded by the interest on the residual money that is in the savings account. One can allocate these dividends to the loan interest as an effective way to balance things out.

When choosing a policy, you will need to determine the correct amount of life insurance that is right for you. Although insurance companies offer a spectrum of estimates as to what size policy a person will need, the best thing to do is calculate your own individual requirements and buffer the estimate to take into account any uncertainties that may occur.

First, figure out how much your dependents will need by looking at their cost of living. Keep in mind that they will need to pay your medical and funeral costs, balance outstanding debts, obtain new benefits if offered by your employer, and in general keep up with their standard of living. Know that expenses are ongoing and will increase in magnitude as time goes on, affecting your calculations. It is better to take the time to do a thorough calculation than to overpay or underpay.

After determining the amount, you will then need to decide if you want term or cash value life insurance. Generally, term life insurance is the ideal option for the majority of people. These plans are cheaper and less complicated to choose because across the board insurers offer very similar deals. Simply look for the one with the highest quality and the best price. Conduct research to make sure that your insurer delivers on their claims.

Making sense of life insurance is easier than you think. There are a lot of types of insurance but really only two main types: Permanent life insurance and term life insurance. The purpose of having life insurance is to ensure that your loved ones will have the financial assistance they need in the event of your death.

For every dollar you contribute, term life insurance often delivers the most protection. When you purchase term life insurance, you only do so for a set amount of time. You may outlive your policy, which means that many term policies are never claimed. For this reason companies are able to offer them at very low rates. On average, 95% of people live past their set term life plans, which means that these policies can be purchased at five times less than most permanent life plans.

On the other hand, most permanent life insurance plans are going to pay out to beneficiaries and interestingly these plans have actual cash value, which means it acts as a source of income. Of course, the premiums are higher than term life, but a well thought out permanent life plan can serve as an investment strategy that brings in money.

Figuring out how much money your dependents will need is a necessary step to calculating how much life insurance you will need to purchase. First, think about how much debt you will have in the event of your death. Let’s say you have a $200,000 mortgage and a $4,500 boat loan. You will need $204,500 included in your policy to ensure that your debts are taken into consideration.

Another factor in deciding how much coverage to purchase is income replacement. As the sole provider of your dependents, if you bring in $40,000 a year, the policy you purchase needs to have a payout that is sizable enough to take the place of that yearly income as well as inflation. It is recommended to err on the safe side and calculate that the payout of your policy is invested in the amount of 8%. At this rate, your policy will have to be a $500,000 policy. This rule is not set in stone, but by adding your yearly income to the policy ($540,000), you have safely guarded against inflation. This amount will, of course, be in addition to any outstanding debts.

Consider also any future obligations such as college tuition for your children, moving, etc. These costs will have to be factored into the policy. Again, if you have a yearly income of $40,000, a $204,500 mortgage and sending a child to college will cost $80,000, so you will want to figure all of these details into how much coverage you would like. After determining the necessary face value of your insurance provider, you can then begin to shop around for a policy that best fits your needs that is also within your price range.

When it comes to insuring others, you should only cover those whose death would mean a financial loss to you. The death of an income-earning spouse is such an example. You can use the same calculations given above to figure out how much coverage you will need for your spouse.

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The main two types of life insurance that you can choose from are permanent life insurance and term life insurance. They both have a few variations that will be covered as well. Anyone seriously looking for a policy should be familiar with these two types of policies and the coverage they provide.

Term life insurance is very easy to understand. When you opt for this type of coverage you are paying for a set duration. Within that duration, the beneficiary that you have chosen will receive your policy benefits should you pass away.

There are other variations on term life insurance as well. Let’s say you purchase an annually renewable term life coverage plan, which means that every year you are given the chance to renew or not to renew. The truth is that every year the price of the policy and its premiums can increase, so some consumers will want to avoid this by opting instead for a guaranteed level term life insurance policy.

Depending on how you have set it up, the costs of this type of policy will remain the same for between 5 and 30 years. There is also a new type of term insurance called ROP (Return of Premium) and if you are still living at the end of the term, the value of this policy is paid out to you. Should you die during this period, the funds will go to your beneficiary.

On the other hand, permanent life insurance will cover you throughout your entire life and comes with higher premiums. There are several types of this kind of life insurance.

First, there is what is called “whole life insurance.” This coverage spans your entire life as opposed to only lasting for a set duration. Overall, a whole life policy has heftier costs and premiums than term life insurance, but still the investment potential does appeal to many insurance seekers.

The second type of permanent life insurance is “universal life.” With this type of policy you are able to factor in a preferred amount to the minimum cost of the premium. Insurance companies are then able to invest these funds and the returns are added to your premiums or allowed to accrue over time. In addition, there is another subcategory of this type of policy called universal variable life, which allows customers to select their own investments as opposed to leaving it up to the insurance company.

“Variable life” is a third type of permanent life insurance and this type of policy also gives you additional investment options, including stocks. This type of policy is not unlike the universal coverage which allows investment returns to either go towards premiums or accrue in another account. The beneficiary will be entitled to the value of the policy, as well as to a portion of, or maybe even the entire cash amount of, the investment returns.

Be sure to speak with a trusted life insurance agent if you have further questions, and/or use the Internet to conduct life insurance policy research online.

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Life insurance for kids? If you ask most insurance agents whether or not you should buy life insurance for your young children, the majority will say yes. Keep in mind however that those agents will earn a commission from the sale, so their opinion isn’t always the most objective. The real question is, is it a sound investment?

In most cases the amount insured is fairly small and the premiums are also low, so it doesn’t seem to be overly onerous. The single biggest selling feature of life insurance for young kids is to guarantee their insurability later in life. By taking out life insurance now, the provider will easily issue new insurance later when the child becomes an adult.

This means that coverage would be ensured even if the individual in question were to contract a life threatening disease. In such a case it would be impossible for the individual to secure life insurance without that previous guarantee of coverage in place. Some experts will also recommend insurance as a vehicle to save money for your child’s future, but this aspect can be exaggerated so make sure you read the fine print. There are many other ways you can save money for your children that may have much better returns because they don’t involve having to make premium payments.

The main idea behind life insurance is to replace the lost income of the family breadwinner so that survivors don’t have to suffer financially in addition to their grief. When deciding whether or not to purchase life insurance for your kids, just be sure to have your own (and your spouse’s) coverage in place first.
Having a family history of health problems (cancer, heart disease or diabetes for example) may make it more difficult for your children to purchase life insurance when they are adults. In this case it might make sense to take out life insurance policy now for your kids to protect their insurability when they get older.

Another reason to consider life insurance is for your own peace of mind. The death of child is devastating to surviving parents and siblings. Having the proceeds of a life insurance policy would allow you to take time off work, get extra counseling, or do whatever needs to be done to allow you to pick up the pieces and carry on with your life, without suffering undue financial hardship in addition to the loss of your child. If he or she does succumb to a disease, the life insurance benefit may also help to offset some of the healthcare costs that in some cases can be overwhelming.

If life insurance seems like a good idea for your particular set of circumstances, then you have several options to consider. You can buy term or permanent. You can buy a standalone policy, or ad them in a rider on your own policy. A whole life policy for a smaller amount ($10-$30,000) taken out on an infant will probably be paid off before he or she goes to college and for a very reasonable monthly premium. Going with a rider to your existing policy will save on extra policy fees and still provide worthwhile coverage and that insurability guarantee. Most will be convertible to an adult policy once the child reaches the age of majority. For some, that can provide the greatest benefit of all: Peace of mind.

This is a very important question that everyone needs an answer to at one time or another, and the answer will be different for each person. There are different types of car insurance that you need to consider: liability, comprehensive and collision. Most states have a legal minimum of liability car insurance that you must purchase, but be aware that the legal minimum is often not enough. If a judgement goes against you for an amount more than your coverage, your entire savings (and more) can literally be wiped out with just one accident.

Liability coverage

This type of coverage will protect you from being sued for personal damages. The Insurance Information Institute recommends that you carry at least $100,000 per person and $300,000 per accident. Again these are minimums and may not be right for your particular situation. If you have more at risk, you may want to consider a liability umbrella policy. This sort of policy will kick in once you have surpassed the limits on your standard liability policy. You can easily get an extra $1 million dollars of coverage for just a few hundred dollars per year added to your premium payments. It’s a good idea to enquire where you have your house insurance about this type of policy, as you will probably get the best rates with a bundled package.

Comprehensive insurance

The amount of comprehensive coverage you require depends on the value of your car and whether you lease or own. If you own an old beater, then you can probably skip this type of coverage. With a new car you will want some coverage to assist in repairs to the vehicle after an accident. If you lease, your finance company will insist that you have this type of coverage.

Comprehensive coverage is intended to kick in when you have damage to the vehicle that is a result from something other than a collision. For example, events like a rock that damages the windshield, or damage from a fire or flood, or someone vandalizing your car would all be covered with comprehensive insurance.
You can keep your premiums under control by upping the deductible. This is the portion of the repair bill that you are willing to pay for. The lower the deductible the higher the insurance premium.

Collision coverage

Collision insurance is important for when you hit something or something hits you (even if you are parked). Just like comprehensive, the insurance company will pay for the repairs if they total beyond the agreed upon deductible amount. Your premiums will depend on the value of the car and the amount of the deductible. Coverage will also max out at the value of the car at the time of the accident, although it is possible to get what is called replacement insurance, but this is much more expensive.

Summary

You are required to purchase a minimum amount of liability insurance as determined by the state where you live, but this is rarely “enough” coverage. Consider an umbrella policy and bundle it with your home insurance to save on premiums, but do not go cheap in this area. You don’t ever want to be found without enough liability coverage.
Comprehensive and collision is where you can save the most money on car insurance premiums. If you lease, you will be required to purchase this type of coverage, but you can limit the premiums by increasing the deductible. If you own an older car, you may choose to go without this type of insurance. As with most insurance products, be sure to consult with an experienced professional before making any purchase.

There are roughly 1,800 companies operating in the United States today that offer life insurance policies. How on Earth do you make a choice? There are so many product choices that seem quite similar, making it somewhat confusing to determine which company and which policy is the best one for you.

Although the price of the policy will naturally seem like the first place to begin narrowing down options, you should really begin by looking at the financial stability of the companies that are offering the life insurance products you are considering. Ideally it will be many years before the company you choose will have to make a payout to your heirs, so you want to make sure that it will still be in existence all those many years down the road. This information should be readily available from your financial representative or insurance provider, or you can locate it yourself at your state’s Insurance Board.

One of the things to consider when looking at the financial strength of a life insurance company is to check out its claims history. Does the company have the resources to settle all of the claims it receives, especially during those years when there has been an abnormal number and/or quality of claims? Looking at this will tell you how well the company can absorb financial shocks.

Naturally you should also check to see if the company is licensed to operate in your state. This is easy to overlook, but there are scams out there and this simple check can save you a lot of time, money and grief. You can find this information from your state Insurance Department or Board.

Although premium payments are not where you should typically start investigations, you should not neglect them either. You will find that premiums vary significantly from company to company and it pays to shop around. Also, be sure to read ALL of the fine print so that you can compare apples to apples when looking at competing policies. For example, some companies charge more because they offer more for their base policy than the next company, whereas others simply charge more.

The quality of the product is another important consideration. Be sure to examine the various riders that are available and other special provisions (for example, the ability to convert from a term policy to a whole life policy without a medical check up). You may also wish to consider other provisions beyond simple life insurance, like disability or long-term care insurance. These may be available as a rider on your life policy, or can be purchased separately.

Last but not least is to consider the customer service that a company provides. Do they give you an 800 number connected to a call center in another country, or do you actually get to speak to a company representative in your own state or town? It is best of all if you can deal directly with a company agent who lives and works in your neighborhood and who is attentive, professional and knowledgeable about the products you are inquiring about. It is also a good idea to consult with your friends and neighbors about their own experiences with life insurance providers, as this can be a great way to narrow down your choices.

In the old days, we used to have to visit the office of the company that provided the insurance in order to secure coverage for an automobile. Sometimes this meant a long trip into the ‘city’ to meet with an officer of the company. With the growth of car ownership across the country, however, the insurance companies needed a better way to satisfy their customers. Soon the birth of the insurance ‘agent’ came to be, and nearly every city and small town had an agent that represented the largest insurance companies.

Not long after that, several agents began to join together and form a new ‘super’ agency that could supply insurance from many different providers, and these agencies attracted lots of customers. It was discovered that these super agencies were able to provide competitive quotes and steer all of their customers toward the best providers. This had the affect of driving the price of insurance down.

You can still find super agencies today. However with the burgeoning advance of technology, there is now an even better way to go shopping for car insurance (or truck or van for that matter). The Internet has made shopping for car insurance incredibly easy and unless you live under a rock, you know that companies like Geico, esurance and 21st Century all offer quotes online

With a little practice and some patience, you can enter a variety of search terms that will yield exactly what you are looking for. All the major suppliers of car insurance offer quotations online. You can fill out a questionnaire on the company website and within minutes know exactly how much your car insurance will cost. With a few more clicks, you can pay for that policy and have it sent to your address in the mail.

With the availability of the Internet you can also receive hundreds of car insurance quotations for your specific situation. You will find that the prices vary significantly, and you will need to read the fine print carefully to be sure that you are comparing apples to apples when you read your policy quotation.

For particularly difficult or unusual situations, you may need to talk to an experienced professional insurance agent. In this case, the Internet can give you the name and contact information for someone you can call and ask questions. It is a good idea to confer with a professional if you have any questions, so you don’t end up spending more than is necessary on your car insurance. It is also important that you get the correct amount of coverage. In short, you don’t want to end up with less than the amount of coverage required, nor do you want to pay for too much.

Another great way to begin the search for car insurance quotes is to ask your friends and neighbors who they purchased their insurance from, and if they are happy with the service they have received. This can sometimes be the best way to narrow down the field of available insurance providers to just a few, so you can then do further research and get quotes from those companies.

Life insurance is important to anyone who has a family or debts. When you die, you should be sure that your loved ones are taken care of and your debts are paid off. This really boils down to a choice between term life insurance and whole life insurance. Let’s take a closer look at each type so you can make an informed decision.

Term insurance is the least expensive but provides only a limited length of coverage. The danger with term insurance is that you may outlive the policy and your heirs will get nothing. Whole life insurance will provide protection for your entire life (even if you live to beyond 100), and in some cases will even build cash values that you can access while you are still alive.

Whole Life Insurance

Since whole life insurance lasts a lifetime and the insurance company is guaranteed to be making a payout, it is typically more expensive. Some of your premiums will go into a savings program. The longer you maintain the policy the larger these cash values grow (due to interest and dividends that get deposited into your policy). While your premiums will be higher than they would be on a term policy, they will not increase over the length of the policy, unlike a term contract.

The extra premiums that are paid during the first few years of the policy get invested and increase the cash values. Later in life your premiums will just cover the cost of the insurance. If you access the cash values in your policy, for the most part you will have to pay taxes on the gains (there are some ways around this in certain circumstances, so be sure to fully investigate), but if you die, the proceeds will be transferred to your beneficiary tax-free.

Term Life Insurance

Term life insurance contracts will provide protection for a set length of time, usually up to age 80. They will also hold their premium payments for a set length of time, usually 10 to 20 years. This means that the premiums will increase every 10 or 20 years. Since you will then be one or two decades older, these premiums can increase dramatically. Because of this, most people only buy term insurance to provide coverage for those 10 or 20 years. The most common use is to insure a mortgage or some other loan. The idea being that the loan will be paid back over the length of the term, negating the need for insurance.

The key question is how much insurance do you need and which type should you buy? A common practice involves buying term insurance and investing the difference (that you would have spent on whole life insurance). This is a great idea, but it can be difficult to put into practice, especially if you don’t have a savings plan in place. Be sure to evaluate your insurance needs carefully so you can make the best decision possible and be sure to consult with a licensed, experienced agent before making any purchase.

How much life insurance do you need? The short answer is, it depends. Some insurance companies will tell you that a good rule of thumb is 10 times your annual income, but if you make $100,000 per year, do you really need to consider taking out a million dollar policy? Again, the answer is, it depends.

Several factors need to be taken into account in order to answer this question. First, you need to consider what you want the death benefit to do. Most people think it should be used to pay off debts, taxes and to take care of loved ones. If it is a large amount, perhaps a portion can also be used to help out some charity that is particularly meaningful to the deceased. You can name just about anyone as a beneficiary in a life insurance policy and they will get the money tax and probate free. Just make sure your will concurs, as there are many gray areas surrounding the idea of, ‘taking care of loved ones.’

As for debt, this usually means paying off the mortgage, lines of credit, car loans and certain other loans. Another debt to consider is your terminal tax return and the funeral expense. A funeral can cost anywhere from $7,500 to astronomical amounts, so be sure to plan for that. The government will also tax you upon your death – and the government can be greedy.

Your assets will be marked sold on the day of your death for fair market value, and you will be taxed at your marginal tax rate, which can be quite high if the value of your assets has increased substantially since you bought them (i.e. summer cottage, boat, etc). For example, with recent changes to the tax laws in the US, the government can tax your estate and inheritance at a 35% rate, over and above $5 million. Individual states have estate taxes as well and in some cases this can be in addition to the federal taxes.

Luckily, there are number of things you can do to reduce this tax bill. One is to pass it all on to a surviving spouse tax-free (but then he or she will have to manage the tax bill upon their death). Another is to establish a trust in each of the beneficiary’s names, thereby reducing the tax rate per individual. Or, you can donate the assets to a charity, as they are taxed at a more favorable rate.

“Taking care of loved ones” might mean ensuring that the children get a university education, or that the surviving spouse can quit his or her job. Or, it might mean none of those things. Although it would be nice if your family had enough money to grieve for your loss without financial worries interrupting the process, if your spouse enjoys working outside the home, perhaps he or she would like to continue doing so and therefore doesn’t really need as much money. In order to determine the best plan of action, consult with a professional tax planner or financial adviser to determine how much life insurance you need, and for help in reducing estate and personal taxes.