Life Insurance Arlington is a safety net that provides financial protection for loved ones after they die. It can help pay off debt, cover funeral costs, or replace lost income.
You can also use it to pay for expenses that your family will incur after you’re gone, such as mortgage, college tuition, and other debts.
The cost of life insurance depends on a variety of factors. Each insurer has its own evaluation process, known as underwriting, that weighs these variables differently. As a result, it’s important to compare quotes from multiple insurers.
The amount of coverage you select will also influence the cost. In general, the more coverage you buy, the higher the premium. There are many tools online that can help you determine the right amount of coverage for your situation.
Other factors that may impact your premium include your occupation, lifestyle, and family medical history. If you work in a hazardous job, like being a police officer, pilot or construction worker, you may pay higher rates than someone who works from home. Similarly, risky hobbies, such as skydiving, may cause you to pay more for your policy.
A medical exam is typically required to obtain life insurance, and the results of this test will affect your rate. The insurer may also require a drug test and a driving record to evaluate your application. Your credit report may be pulled, and bankruptcies and other issues on your record will typically result in higher premiums.
Term life insurance is typically less expensive than whole life or universal life, as it has a set expiration date and doesn’t build cash value. However, whole life and universal life policies typically have a portion of the premiums that accumulates as cash value that can be borrowed against or withdrawn later in life. Adding riders to your policy can also increase the cost of your life insurance. These can include waiver of the premium, children’s riders and additional accidental death benefits. Some insurers offer accelerated underwriting, which allows you to skip the medical exam and obtain coverage within a day or week. Others require a traditional medical exam and may take over a month to approve your application.
Many people buy life insurance to provide peace of mind for their beneficiaries after they die. In addition, it can help families cover final expenses such as funeral costs and burial. In most cases, a death benefit is not considered income, and beneficiaries do not have to pay tax on it. However, there are some exceptions.
Life insurance can also provide other benefits to the insured during his or her lifetime. For example, some policies allow a portion of the death benefit to be paid out during the insured’s lifetime as a form of annuity. These payments are typically tax-deferred, and the beneficiary can withdraw them at any time. Some policies also have a cash value component that accumulates over time. A small part of the premiums go toward this, and the policyholder can borrow against it if he or she needs money.
Some whole life policies have a set duration, such as a term or endowment policy. They can also have a limited payment period. At the end of this period, the policy is “paid-up” and no longer requires a monthly premium. Another option is a joint whole-life policy, which provides coverage for two or more people.
Most permanent life insurance policies have a cash or account value that builds up over time. Some of this grows through dividends, which are profits that the insurance company pays to its policyholders. The policyholder can choose to leave these in the account to earn interest or use them to reduce the premium. However, if the policyholder does not make required out-of-pocket payments, the policy may lapse.
Some permanent policies also offer living benefits, such as the ability to tap into the death benefit while still alive to help with certain medical expenses. However, the eligibility requirements are strict and often revolve around severe health conditions or terminal illness diagnoses. A fee-only financial planner can help you decide whether or not this type of life insurance is right for you.
Life insurance is generally not taxable, especially if the death benefit is paid out in one lump sum. However, there are a few exceptions that can affect taxation. For example, if the death benefit is paid to someone other than the insured who has a “financial interest” in the insured, it may be considered a taxable gift by the IRS. It’s also important to keep in mind that if the death benefit is paid to the insured’s estate, or if the beneficiary chooses to receive the proceeds in installments rather than as a lump sum, interest may accrue and be taxable.
In addition, permanent life insurance policies usually have a cash value component that earns tax-deferred interest. You can borrow against this portion of the policy, and withdrawals are typically not taxable as long as they don’t exceed your “basis” in the policy. If you take too many loans, the insurance company may force you to surrender the policy in order to cover outstanding debts. If this happens, the gains in the policy (including investment earnings) are taxable as ordinary income.
Finally, if the insured transfers ownership of the policy to another individual within three years of death, the gain is subject to federal income taxes. This can be a good idea for business owners who want to pass on their business ownership in a tax-efficient manner. The same rule applies if the insured transfers the policy into an irrevocable trust.
Prudential Financial and its financial professionals do not provide tax or legal advice. Please consult your tax or legal advisor regarding your personal situation.
A life insurance rider is an add-on to a policy that allows the insured to access some of the death benefit while they are still alive. This can be helpful if the insured is diagnosed with a terminal illness or requires ongoing care for a chronic condition. The insured can use the funds from the rider to pay for their medical expenses or other living costs. When the insured dies, their designated beneficiaries receive a reduced death benefit, minus any amounts they have used from the accelerated death benefit rider.
There are many different types of riders available, and each will affect the insured in a different way. Some riders will increase the death benefit of the policy, while others may not offer a significant benefit for the insured. Regardless, it is important to understand what each rider offers before making a decision to purchase one.
Some life insurance riders are offered for free, while others come at an additional cost. In addition, the amount of coverage that a person can buy on a rider will be affected by their health status and the type of policy that they have. In some cases, the insured may not be able to afford the additional coverage that they want to acquire.
Riders can be useful to protect against specific misfortunes or unique circumstances, but the best option for a life insurance policy is to seek guidance from a financial professional who can advise on whether a particular rider is worth the investment. A good financial professional will take the time to review your situation and can connect you with a trusted agent who can help you select the right life insurance policy for you.
Beneficiaries are the people who receive life insurance proceeds after a policyholder’s death. They can be any person or entity, including charities, trusts and estates. Beneficiaries are usually paid a lump sum, but they can also be paid in installments. It’s important to name beneficiaries carefully and to keep them up to date. Otherwise, the wrong person could receive your assets or life insurance proceeds. This is especially true if you fail to update them after marriage, divorce or the death of a beneficiary.
The primary beneficiaries of a life insurance policy are typically spouses, children or parents. However, it’s possible to select more than one beneficiary and assign them different percentages of the total death benefit. This is commonly done to accommodate multiple family members or friends.
A common reason for buying life insurance is to cover funeral costs or other end-of-life expenses. The death benefit can also help beneficiaries pay off debt and other bills. Some people also use it to fund education or other lifetime goals.
When choosing beneficiaries, it’s a good idea to consider whether they’ll be able to manage the money wisely. If you’re leaving the proceeds to children, for instance, it may be a better option to establish a trust that details your wishes.
If you have any questions about naming beneficiaries, it’s best to consult an attorney or financial professional. The rules can vary by state and by life insurance provider, so it’s important to know what they are before making a decision. It’s also a good idea to check your beneficiaries regularly and make changes as needed. This can help ensure that the right person is receiving your estate or life insurance policy.