The whole point of life insurance is to “insure” against end-of-life calamity. Some market trends and legislative activities are bringing the whole matter of affordable life insurance to the minds of people young and old.
Term life insurance is the most affordable life insurance product, month to month, and because of some demographic and lifestyle changes across the population, premiums for term insurance are right now near the lowest point they have been in 20 years. Young consumers without life insurance policies are looking with increased interest at term policies.
AFFORDABLE LIFE INSURANCE QUOTES
The insurance product is called “term” insurance because premiums are locked in for a fixed duration, or term, at the end of which coverage continues but premiums begin to rise. Customers buy term because, first of all, it is affordable life insurance. But they also are betting that either they will die during the stipulated term and the insurer will pay their heirs, or that they when the level premiums end, they will have sufficient income to continue to pay rising premiums.
Some term life insurance policyholders eventually convert their coverage to a permanent insurance product. The benefit of doing so is that the insured does not have to face ever-increasing premiums as he ages. The penalty for doing so is that the new fixed premium is larger than was the payment for the term policy. This is when a policyholder must pull up his calculator app and crunch the numbers.
Because the U.S. population continues to age, however, another kind of conversion also is becoming popular: turning life insurance into long-term care insurance. According to a Genworth Financial study, long-term care costs are rising faster than the inflation rate in all the major metropolitan areas of Florida. Genworth concluded that the average annual rate of a private room in a nursing home in Florida is now $82,000.
TERM LIFE INSURANCE POLICIES
This month, Florida legislators established a task force and a calendar for examining just what cost savings there are for Florida seniors who convert their life insurance to long-term care plans to become Medicaid eligible. The task force will study the issue this year and report back with recommended legislation for the 2013 session.
The most affordable life insurance—term insurance—serves younger consumers well, lends itself to conversion to permanent insurance at a later stage, and in turn can morph into a long-term care benefit for people near the end of their lives. At every successive stage, avoiding calamity remains the goal.
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Ways to pay off debt through life insurance
A life insurance policy can help you to pay off the unpaid debts through three main ways and these are:
1. Withdrawing money from your life insurance policy – You can use the cash from your life insurance to pay off your debts. However, you will have to use your cash value insurance policy to pay off your debts rather than using the term life insurance. In cash value insurance, the cash value grows year after year with the tax-deferred interest. Once you have been able to accumulate good cash value, you can use the amount to pay off your debts. However, while doing so, you will have to go on making the monthly premiums on the insurance in order to maintain your policy.
2. Borrowing from your life insurance account – other than withdrawing money from your life insurance, you can borrow from the policy to pay off your debts. Here borrowing is same as any other kind of borrowings. That is you can take out a loan against the built up cash value of your insurance policy. Thus, you will have to pay back the amount that you are going to borrow against your policy, otherwise the value of your policy can get reduced. However, in case the policyholder dies before paying back the amount he had borrowed, the balance is then deducted from the policy and then the remaining balance is handed over to the beneficiary(s) of the policy.
3. You can also consider life settlement option – Another way in which you can use your life insurance to pay off your debts is through life settlement. This can be your option if you either transfer or sell off the policy to a third party in lieu of a certain amount of money. If you do so, you as a policyholder may be able to get an amount more than that of the cash surrender value of your insurance policy. But, the fact is that this amount which you will receive will be less than the amount which you would have received as death benefit.
Another thing that you should know about life settlement is that the person who buys the policy becomes the policyholder. As a result, he will have to be responsible for making the premium payments. Other than this, you won’t be able to opt for life settlement unless you are a senior citizen (more than 65 years of age). The life settlement proceeds are also taxable.