Many New Yorkers spend substantial sums each year on life insurance premiums with little understanding of what they are getting for their money. This resource center provides an overview of the most common life insurance policies and important shopping tips to help you get the best value for your dollars.
Whether you are looking to pay off your mortgage, send your children to college or provide a cash legacy for heirs, life insurance can help ensure that your family’s financial future is secure. However, there are a number of factors to consider when choosing the type and amount of coverage that is right for you.
A life insurance policy provides a lump sum, or death benefit, to your beneficiaries after you die, which they can use to pay everyday bills and debts, meet living expenses and other costs, such as funeral expenses. You can purchase a policy that pays out a lump sum, which is often called whole life insurance, or one that pays out a monthly or annual income for a specified period of time, which is called term life insurance.
Choosing life insurance beneficiaries is an important part of the application process. You can name a single beneficiary or multiple beneficiaries and decide what percentage of the death benefit each will receive. You can also add contingent beneficiaries, who will receive the death benefit if the primary beneficiaries die before you do. Many people also create trusts to hold their life insurance policies, which can have tax benefits.
The type of life insurance you choose will determine how much your premium will be. The more extensive your coverage, the more expensive the premium. The age you are when you buy a policy has a significant impact on the cost, as does your health and family medical history. Sex also plays a role in the cost of life insurance, with males typically paying more than females.
If you select a level term life insurance policy, the death benefit and policy face amount are guaranteed to remain the same for the length of the contract, which is usually 10, 20 or 30 years. This type of policy can be a good option if you are concerned about increasing life insurance costs or if you want the flexibility to change your premium payments and duration of coverage as your needs change.
You can also purchase a variable life insurance policy, which is more flexible but comes with a higher risk of losing value over time. These policies allow you to change your premium and coverage amount, and they have a cash value component that grows at a variable rate. These policies may also offer the ability to borrow against or make withdrawals from the cash value account, although these are often subject to taxes.
Most insurers offer the convenience of accelerated underwriting, which allows you to skip a medical exam and obtain approval in as few as a day or a week. Some even offer simplified underwriting, which requires limited medical information and can be approved in minutes. Other insurers follow a more traditional approach, requiring a medical exam and a more involved application process that can take up to a month.