Personal Finance Tips

For those who are new to the world of insurance and don’t have an idea of what the term insurance means, let’s do a quick definition of the word insurance.

Simply put, insurance is a contractual agreement between two parties called the insurer and the insured, where the latter make payments known as premiums to the former in return for an insurance policy which puts an obligation on the insurance company (insurer) to pay for the financial loss of the insured arising from a specified happening or a particular event. In other words, the insurance company pay a certain amount of money for the particular kind of loss that is stated in the agreement.

An insurance agreement could be for your car, building, office equipments, motorcycle, pet, burglary, etc. It could also involve protection for some unusual types of financial losses such as we see in a situation where certain footballers like Cristiano Ronaldo, Lionel Messi, Cesc Fabregas etc. insuring their legs against injuries on the playing turf.

In a nutshell, what an insurance policy does is to give the policy holder a financial covering in the event of a particular accident happening and restoring him to his former state before the accident.

Note that when choosing an insurance company to do business with, it is pertinent you take your time to find out certain information about the firm such as; their financial stability, frequency of payments to clients, industry rating as well as their strengths compared to that of competitors, goodwill, and so on. All these are important, so as to avoid putting your money in an organization that won’t be able to give you financial covering in the long run.

How do I get an insurance policy?

You can get an insurance policy through various available means. The most popular way is to get policies through commissioned agents. Some of them are staff under the payroll of the insurance companies, while others are simply entrepreneurs who sell policies of various insurance firms for a certain amount of profit.

However, in today’s world you can get anything you want right there in your living room through the internet. So many online insurance agencies that you can talk to have a presence on the web. You can always get your desired insurance policies from them. They are always open to online support and chatting if you need help and clarification on any issue.

You will do yourself a whole lot of good by checking them out.

Mortgage Life Insurance is one of those Insurances that not many of us completely understand. These types of policies are often taken out when a lender agrees a mortgage and the person applying for the mortgage just accepts it as part of the procedure. If you look through this type of purchase from your lender, you will see it is no more than Term Life insurance. The premiums grow on a five year span even though the value of the policy drops as your mortgage drops.

An alternative to this is individual life insurance which is more productive and cheaper

You are able to compound life insurance and debt protection with this type of scheme or you can tailor it to suit your debt needs. If you choose to connect the two, it is a resolution to both issues, as a result making better financial sense. Individual life insurance for a debt from a mortgage, will either be Term or Permanent insurance. When you take out a Term insurance scheme you have the option of how long you want it to run for. If you want a scheme to run for your lifetime as well as know how much is being paid out each month, then the Permanent scheme is the best one for you. If you are looking to have a lump sum of money, then a Permanent scheme is possibly the best one for you, as you can build up a cash sum which will pay out at a certain point.

Below are some extra perks you could expect to have if you took out individual life insurance:

The coverage is portable, if you move house or switch to another lending company. You pick who is the assignee, not the lending company The individual policy pays out twofold in the event both spouses die You are not limited to one type of policy, you can have both Permanent insurance and Term insurance under one policy. Cover can be maintained even once your mortgage is paid-off.

Insurance brokers popularity had significantly increased in the last couple of years. Traditionally, if someone wanted to find the best insurance rate, they would have to approach multiple insurance companies, fill out various forms and then request rates from each company individually. Very often a structure of a product is very complex, and it could be very difficult to understand to an average customer differences in terminologies and coverage. This is where insurance brokers come in. They represent their clients. They work with a number of

Insurance companies and choose the policies that are best for their clients. Since they know insurance products inside out, they have the ability to consult the client and match him/her together with the product that is least expensive and has best coverage. Most often, brokers are commissioned sales people, who get reimbursed by insurance company. This means there are no upfront costs for the client.

Insurance brokers sell insurance policies ranging from life,car,disability and term insurance.

There are also some specialized policies that brokers sell. They include corporate, farm and crop insurance.

Insurance brokers often attend seminars to keep up to date on insurance regulations, products and laws.

Other duties of insurance brokers are:

- compare and explain products and providers
- help their clients calculate net worth
- build and maintain a client base
- maintain detailed client files
- help their clients identify goals and objectives
- make recommendations on how clients can achieve their goals and objectives
- help clients gather information from bank account records, income tax returns, life and disability records, pension plan information and wills.

The selection of insurance products and offers you can choose from on the market is overwhelming. And choosing a policy to insure your life with can be tricky, requiring you to both evaluate your insurance needs and spend some time on comparing the offers you get from different providers. It’s not just a possibility you can think of while buying insurance, it’s a firm requirement that the product you want to buy meets your exact personal needs and can be adjusted to your budget, not the other way.

In contrast with continuous policies term insurance policies are designed to provide coverage only for a certain period of time, specified in the policy. A term policy will provide the benefits specified in it only if the insured person dies within the specified period. Besides, term policies do not have cash value accumulation potentials. So in case you are alive and well and your policy term expires, you won’t receive any money. Another important aspect of term policies is that the premiums can’t be fixed and it is likely that they will increase with the time passing. In order to make sure your rates are constant, choose a guaranteed level premium term policy that guarantees a fixed premium over the entire duration of the policy.

Advantages of term policies

Term policies are known to have the highest value for money you pay and the lowest price among other types of life insurance. That is why they are most beneficial for those families that have limited budget they have to fall into. These are some advantages you get with term policies:

Affordability

Term policies have the lowest premiums for the largest death benefits obtainable.

Simplicity

Term policies are the least complex insurance product for insuring your life on the market.

Competitiveness

Due to the simplicity of this product, there is a fierce competition between numerous providers offer term policies, which in turn allows effective comparison shopping when looking for a policy.

Flexibility

Term policies have the possibilities of “renewal” and “conversion”. Renewal means that when the policy term expires you can prolong its duration, without buying a new policy. Conversion means that when the term of the policy expires you can convert your term policy into a permanent one, without buying a separate policy.

Waiver of premium

With term policies you also get an additional feature referred to as “waiver of premium”. It allows you to halt premium payments for a stipulated period of time in case you are unable due to circumstances listed in the policy. Still, it is an optional feature that has its price.

Different time options

Term policies being a cheap life insurance options provide coverage for a period of time you feel appropriate. You can insure your life for a term of anything between one to thirty years, gaining death benefits if something happens to you during this term. It’s a good way to plan your finances well ahead, making sure that such crucial things as mortgage or business loan will be paid out no matter what.

Different rates

There are many companies out there on the market that offer term insurance policies. Get life insurance quotes from them and you will probably get very attractive rates by shopping around.

One of the results of the recession has been to reinforce the tendency to opt for term insurance as the first life policy. With the disappearance of credit and the pressure on employment, people have decide to switch to prudence. That means paying down the debts and cutting back on discretionary spending. Is this financial puritanism sensible? There are a number of factors to consider. First, a definition. A term policy is life coverage for a fixed number of years. Think of it as like a bet. If you are still alive at the end of the term, the insurance keeps all the premiums, and you and your dependents get nothing. Now, let’s focus on the psychology of the young. Most never bother thinking about insurance or, if they do, it’s a very low priority. Why bother worrying about something that’s unlikely to happen for decades? Statistically, this is a reasonable view. Just as many young people back their health and refuse to buy an individual health plan, the majority see no advantage in life insurance. Life expectancy has been rising steadily over the last 50 years. This calm confidence lasts until they enter a stable relationship. Until children appear. But, by then, the cost of living has gone up and, potentially, what was two incomes has become one. Then, buying term insurance is the cheap option.

The real question is whether buying a whole life policy early is always the right answer. The argument goes that you take on the higher premiums when, as a young single, you have the most disposable income. Inflation and pay increases slowly make the higher premiums more affordable. If you do become a two-income family, this really takes the pressure off. Hopefully, by the time children come along, you have already produced a financial situation in which the premiums are now affordable. Hmmm. Back to definitions: this policy insures your life, but also has an investment element that builds up a cash value over time. If you keep up the premiums, this provides security during retirement and for your dependents. Except, people do not make rational financial decisions. The young prefer to enjoy their youth rather than stay home and save for their retirement. Worse, the reality of most of the investment elements is that they represent poor performance. If you bought term insurance and invested the balance of the premium saved in regular investments, you would almost certainly do better. The hard reality is the insurance companies charge commissions for setting up your account and then impose management fees for investing your money. This slices the top off the investment returns.

So the conclusion is slightly bad news. The decision on what to buy is not directly related to the life insurance quotes you receive through a site like this. The best value is buying term insurance and having the self-discipline to invest a growing proportion of your income. If you do not have that self-discipline, the whole life, universal and variable policies represent compulsory savings. In effect, you are paying the life company to do the work of investing for you. The perfect choice starts with the life insurance quotes and diverts through the office of an independent actuary who will give you an educated guess on the quality of the investment returns from the whole life policy as against managing your own investments over the next thirty years or so. Now you can decide whether you want to trust yourself or accept a low but guaranteed yield from the insurance company.