New to life insurance? Here's what you need to know:
Learning about life insurance is a matter of asking the right questions. Let's start with a basic one: "Why do I need life insurance?" If you have a family, a life insurance plan from Transamerica is one of the best ways to ensure a secure Tomorrow for them. Should you die unexpectedly, life insurance gives your family (and you) the peace of mind to know their future will be financially protected.
What type of life insurance do I need?
Life insurance is not one-size-fits-all. Your policy can be tailored to meet your financial objectives. Your answers to the following three questions can help you decide:
1. Where are you in life?
People have different priorities at different stages of their lives. Situations like starting a family, putting your son or daughter through college, buying a house or getting ready to retire can influence the type of life insurance you need. So, too, can your income, debt and savings levels.
To help you explore your options, Transamerica Direct has created an easy-to-use online tool: the Personal Plan Builder. Based on where you are in life and your current needs, it will guide you to the right Transamerica plan for you.
2. How much do you want to pay monthly?
You can use the Get-A-Quote tool on this website to find a plan and price you're comfortable with. Generally, permanent insurance costs the most because it lasts your whole life. Term insurance is less expensive because it is designed to meet more temporary needs. Accidental Death insurance is usually the most affordable, providing significant coverage levels but only for deaths due to a covered accident.
For more on term and permanent insurance go to Life Insurance Types.
3. Do you want the ability to build cash value that you can borrow against?
With permanent life insurance products like whole life and universal life, a small portion of the premiums you pay accumulates as cash value, which builds up over time. Your cash value allows you to take out loans or adjust your payments, depending upon the type of policy you choose.
For more on cash value features, go to Life Insurance Types.
How much life insurance do I need?
Basically, try to identify how much money your survivors will need to maintain their current standard of living and how long they will need it. There is more than one way to do this.
You can also base the face value of your life insurance on a multiple of your annual salary. How many years of salary do you want to cover? According to research from the Insurance Information Institute, a nonprofit, communications organization supported by the insurance industry, the number should be between three and 10.
Another way of deciding is to calculate the total income that would need to be replaced upon your death to help pay for your family's financial needs. Consider living expenses (daycare, household bills, rent or mortgage, and credit card debt), immediate expenses (medical bills, burial costs, and estate taxes), and long-term financial goals (savings for college education and retirement). To leave your family well- protected, be sure you create an exhaustive list of expenses.
What are my responsibilities after I purchase a life insurance plan?
Naturally, you have to pay the monthly premiums. Beyond that, keep in mind your life insurance plan isn't a set-it-and-forget-it plan. As your life situation changes—marriage, children, new job, buying a house, etc.—you should review your life insurance coverage and adjust it accordingly. Even without a major change in your life, it's a good idea to review your plan once a year. Also, keep your insurance paperwork with your other financial records and legal papers. That way, your survivors can easily find it.
How is the death benefit paid?
First, your beneficiary needs to submit a life insurance claim and a certified copy of the death certificate. After that, the way the death benefit is paid out varies by company and the specific product. Here are some common examples:
The entire amount is paid out in a single payment.
Specific income provision:
Your beneficiary is paid both principal and interest on a predetermined schedule.
Life income option:
Your beneficiary receives a guaranteed income for life, based on the amount of the death benefit.
Interest income option:
Your beneficiary is only paid interest on the death benefit, with proceeds going to a secondary beneficiary upon your first beneficiary's death.