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Life insurance may be defined as a “specific contract between a policyholder and an insurer in which the latter guarantees the payment of a death benefit to the beneficiaries that have been named in the contract policy, upon the demise of the insured party.” In other words, the insurance service provider company will provide monetary compensation to the heirs of the deceased policyholder in lieu of the annual premium payment by the policyholder/s. Please call us at 407-344-1012, or email us at [email protected] for any insurance needs you may have.
The Key Purpose of Life Insurance in Kissimmee, FL
The main reason for acquiring life insurance is to provide financial protection to the surviving dependents of a deceased individual. Here, it is deemed very important to understand the fundamental essentials of the policy before the prospective applicants make a decision to acquire life insurance in Kissimmee, FL.
An individual opting for insurance will have to thoroughly analyze their own financial situation and then proceed to determine the overall standard of living of their surviving dependents before they purchase a life insurance policy. In this case, many times, the life insurance agents or brokers of different policy carriers are absolutely instrumental in carrying out a ‘needs assessment survey.’ Once that is done, these agents will establish the type and scope of life insurance policy that is most suitable to address these needs. There are currently many different life insurance channels and products available in the market. They include whole life, variable universal life (VUL) term life, universal life, and other policies. It is generally considered a wise move to thoroughly re-evaluate all of your life insurance needs every year or, for that matter, after significant life events such as divorce, marriage, the birth of a child, and major purchases, such as the purchase of a new home.
How does Life Insurance Actually Work?
There are at least three major components of any particular life insurance policy. Let us take a look at them.
Death benefits are the total amount of monetary benefits that the insurance carrier will guarantee to the surviving beneficiaries that have been identified in the policy on the death of the original policyholder. In this case, the insured individual will make a choice regarding their desired ‘death benefit amount’ after carefully understanding the estimated future needs of all of their surviving heirs and other family members.
It will then be up to the insurance company itself to determine if there is an insurable interest and furthermore, if the insured person actively qualifies for the blanket insurance coverage as per the company’s own underwriting requirements.
Premium payments are generally determined through the creative use of ‘actuarially’ based statistics. This is why it is very important to understand the importance of opting for a life insurance company that has at least a few highly experienced actuaries on board. The will help the insurer to determine the overall cost of insurance (COI). That is the total amount that might be required to cover different administrative fees, mortality costs, as well as other policy maintenance fees and related expenses.
Following are some of the other important factors that influence the amount of annual premium payments:
- The insured party’s age
- Occupational hazards
- Medical history
- Personal risk propensity
If all the requirements have been met, it will become incumbent on the insurer to pay the death benefits to the beneficiaries of the insurance contract. If the company providing life insurance in Kissimmee, FL, goes back on their deal, the beneficiaries have the legal right to take them to court.
Principal Cash Value
Cash value of a life insurance policy is a vital component that primarily serves two main purposes. First and foremost, it acts as a savings account, that can easily be used by the policyholder himself during his life. In this case, the cash will be accumulated on a tax deferred basis. However, it is possible that some policies might have certain restrictions on their withdrawals. Such conditions are typically dependent on the overall use of the amounts withdrawn by the insured party. Apart from that, the second purpose of providing the cash value is to help offset the near constant rising cost of living. This will be in the form of a ‘hedge’ to help the insured as he grows older.
The Concept of ‘Life Insurance Riders’
Many insurance companies that provide life insurance in Kissimmee, FL, generally offer their policyholders the option to ‘upgrade’ or customize their policies so that they could also accommodate their own personal needs. As a general rule, insurance riders is the most common means through which a policyholder may modify their respective insurance plan. While multiple riders exist for life insurance in Kissimmee, FL, their availability will depend on the service provider.
The ‘Accidental Death Benefit Rider’
This rider provides an addition to the life insurance coverage, which is over and above the regular policy. This rider will only come into effect in the rare event that the insured’s death occurs due to an unforeseen accident.
Mr. John Smith has a life insurance policy with a total amount of $500,000 that will be paid to the beneficiaries in case of his untimely demise. He decides to ‘upgrade’ the policy by adding a $1.2 million ‘accidental death benefit’ rider. Should Mr. Smith die because of a natural cause such as heart attack or stroke, then his surviving heirs and beneficiaries will be entitled to an approximate $500,000.
However, if he were to die as a result of a plane crash, then his surviving family members will not only receive the $500,000 life insurance benefit of the original policy, but they will also receive the $1.2 million accidental death benefit as stipulated by the ‘accidental death’ clause of the policy. This way, their total net payout will be around $1.7 million.
The Waiver of Premium Rider
This rider basically ensures the waiving of the annual premiums if the policyholder becomes an invalid and is, therefore, unable to earn money.
Ms. Jane Doe lives alone and works the 9-to-5 shift at a rice mill in order to sustain herself. One day, she suffered a stroke and the right side of her body became paralyzed. As a result, her annual premium payments were waived, while her life insurance policy remained intact. Furthermore, she also had a ‘disability income rider’ along with her original policy. Due to this rider, she is now also entitled to a fixed monthly income.
The Accelerated Death Benefit Rider (ADB)
This is a rider or ‘upgrade’ that may be attached to a simple life insurance policy. It effectively enables the original policyholder to receive a certain amount of hard cash advance, which will be paid by the insurance company against the usual death benefits already mentioned in the policy. However, this rider only applies after the policyholder has been declared to be suffering from a terminal illness that has no possible cure.
Mr. Adam James was diagnosed with an incurable strain of cancer. He has been told that he will not live for more than 12 months. He decided to avail the Accelerated Death Benefit Rider (ADB) rider so that he would have sufficient money to continue his treatments as well as all other expenses required to keep him alive and relatively pain-free for the time that he has left.
In this case, Mr. James had a policy that allowed him to collect a pre-specified portion of the death benefits that were to have been provided to his beneficiaries after his demise.
However, every policy and plan is intrinsically unique and dependent on the terms and conditions already pre-specified between the insured party and his/her insurer. In some cases, only a certain amount may be released as ADB, while in others, the full amount, which had originally been sanctioned for the beneficiaries, will be handed over to the original policyholder to ease his passing. Here it is pertinent to understand that a thorough review of your life insurance in Kissimmee, FL, is required in order to understand the nitty gritties of your insurance plan. This way, you will be in a position to better understand if you require any additional coverage or riders to go with your core life insurance policy.
Life Insurance Policies: What Is Out There?
There are different types of policies and plans as far life insurance is concerned. Let us check out a few of the more popular types of life insurance in Kissimmee FL.
Term/Pure Life Insurance and its Applications
This type of policy basically guarantees the payment of a pre-specified death benefit during the term already mentioned in the policy contract. Once this term expires, the policyholder either directly renews the same for another term or converts the same for permanent coverage (that will be applicable for the duration of the policyholder’s life). He can also opt to allow the policy to self-terminate once the term has expired. This is a fairly useful policy if you want to protect your heirs from an uncertain future, but don’t want to pay a lifetime worth of premiums.
Mr. Smith is 25-year-old and has recently gotten married and his wife is expecting their first child. He is interested in protecting his family in case he suffers an untimely demise. Let us suppose that he purchases a $400,000 decade long life insurance policy. In this case, he will have to pay the service provider for life insurance in Kissimmee, FL, an annual premium of $480. Should Mr. Smith die (irrespective of the causes) within the stipulated 10-year term, then the insurance carrier will pay Mr. Smith’s surviving heirs (or any other beneficiary) a sum of $400,000.
Alternatively, Mr. Smith does not die and is currently 50 years old. If the policy were to expire at this point in time and he does not renew it, then his demise will offer no monetary benefits to his heirs. They will be entitled to financial protection only if Mr. Smith would have renewed his policy. Here it is pertinent to note that renewal of this policy will not be automatic, but rather the premium payments may be adjusted upwards, keeping his current age in mind.
Universal Life Insurance (ULI)
A universal life insurance policy or plan is a whole lot more flexible than its typical pure life insurance policy counterpart. In this case, the erstwhile policyholder will have the flexibility to adjust not just their annual premium payments but also their death benefits. The premium aspect of a ULI policy premium payment generally consists of two separate components: The ‘cost of insurance’ (COI) as well as a saving component, which is known as monetary or cash value.
Here, the COI is the bare minimum amount of life insurance premium payment that would be required to keep the insurance policy active. There are multiple expense items that are rolled together into one central payment. These include the following:
- Policy administration
- The charges for mortality
- All other directly associated expenses that are required to keep the policy alive
The COI will vary on a ‘policy to policy’ basis and will depend upon the policyholder’s insurability, his age as well as the total insured risk amount (as determined by the insurance service provider).
The collected premiums that are determined to be in excess of the sum total cost of the insurance will accumulate as the ‘cash value’ portion of the ULI policy.
These are only a few types and forms of life insurance in Kissimmee, FL. You will have to check and see which one is just right for you. But regardless of the policy you choose, it will be very important that you conduct your due diligence beforehand so that there are no glitches in case your loved ones have to make any compensatory claims.
Please call us at 407-344-1012, or email us at [email protected] for any insurance needs you may have.