Life Insurance Basics Plans and Coverage

Life Insurance Basics


Life Insurance is a strange term because it covers one’s family after the policy holder dies. It’s called “life” because it protects your family from sudden income loss or provides them with a financial gift from you after you pass away. It is a tax-free benefit worth buying since you can work with the insurance company to come up with a plan you can afford to pay. On the part of the policy holder, he never benefits from his Life Insurance plan unless he sells or cashes in on his policy – a process which is very complicated and diminishes the value since he would have to pay commission to the agent who brokers the sale.

There are 2 main types of Life Insurance plans: the Permanent and the Term. The Permanent covers your entire life. Even if you suffer from a medical condition, the premium does not increase so you are protected from additional medical expenses. The Term Life Insurance covers a limited time period usually 1 to 20 years. After the period expires, the insurance policy is no longer valid and the beneficiaries or policy holder do not receive anything. Term Life Insurance is common with parents of young children or adults with an elderly dependent on their income like a sickly parent. You would want to insure their protection if you happen to pass away before they do.

Life Insurance Basics

The cost of Life Insurance is wide open for those interested. There is no perfect plan that will fit everyone. You will have to customize a plan that will fit the needs of your beneficiaries. Insurance companies expect a certain amount of diligence from their customers and so are mostly willing to discuss terms and work out a cost-friendly premium.

According to the National Association of Insurance Commissioners, women ages 35 up to retirement age have a 30% chance of getting injured or unable to report for work for a limited period. Men have a 20% chance of something happening to cause them to stop earning. This makes Life Insurance critical because it will ensure against loss of income. In addition, majority of finance experts say that Life Insurance is most important when you have dependents. Under this assumption, there are a few guidelines to take note of:

  • As much as possible, buy Life Insurance when you are healthy and young because the rates are lower but don’t buy until you have people dependent on your income. Also, if you are a smoker, you will probably be charged a higher premium based simply on your smoking habit
  • Be honest with your personal details especially your medical history
  • Your coverage should be good enough to cover your needs
  • Never be pressured by an insurance agent to close a deal. Read the terms and compare with other quotes. Keep in mind that approximately 80% of your premium paid on the first year goes to pay the insurance broker’s commission and being in a very competitive market, these brokers tend to be very aggressive and push for Permanent or Whole Life Insurance rather than Term Life Insurance

A common misconception about Life Insurance is that it is an expendable commodity when it should be thought of as an investment. There are Whole Life Insurance plans that require you to pay for a number of years and once you are fully paid, you are given options to cash out, increase its value by upgrading the policy, or allow it to earn interest.

Basics of Home Insurance

Home Insurance Coverage and Basics

basics_home_insuranceHome Insurance is also known as homeowner’s insurance (HOI) or hazard insurance. It is covered under property insurance for privately-owned property – as compared to commercial buildings, warehouses, or factories.

Home Insurance covers different types of protection like fire, loss of use, damage to content, theft, personal liabilities, rental while home is being repaired, and damage to the house caused by something other than flood, earthquake, misuse, vandalism, or poor maintenance. There are special types of insurance policies that cover damages caused floods and other natural calamities.

If a house is under mortgage, the homeowner will be required by the lender to purchase Home Insurance. Once the property is fully paid, Home Insurance is a personal decision and not mandated by law. However, in case the homeowner has plans of applying for credit or a loan and plan to offer your house as collateral; or you live in an apartment complex or condominium; the lenders or your neighbors will ask that you insure your property.

On the average, Home Insurance covers 50 to 70% of the assessed value of your home. This means that in case of repairs or damages, the insurance company will cover this amount and nothing more. This is also one of the reasons it is imperative for homeowners to personally but objectively assess the contents of the house and incorporate the valuable items into the Home Insurance policy or insure them separately,

Home Insurance Basics

Since Home Insurance is a combination of property and liability coverage it is also known as a multiple-line policy with an indivisible premium. This means the policy holder is paying only one monthly premium for both risks.

Deciding on the insurance amount for your house would depend on several factors such as assessed value of the property and its contents, the cost to replace it, budget, and the offers by the different insurance companies. The policy covered a fixed period which is usually 12 months. During the 12 months, the premium does not change. Once the policy expired, the insurance company may or may not increase the premium under a new contract. This would depend on the negotiations, renovations done on the property, repairs needed, and payment performance of the policy holder. On the other hand, it is possible to negotiate for a Perpetual Insurance which does not have a fixed term.

Aside from flood and earthquake, the standard Home Insurance policy does not cover or offer limited coverage on the following: mold damage, damage from a backed-up sewage, sinkholes, termite infestation, radiation from a nuclear plant accident, and acts of terrorism. There are insurance companies that will charge you extra to include a few of these threats like the backed-up sewage.

Many financial experts would advise homeowners to buy Home Insurance because it is a financial asset that protects your real estate asset. There are ways to afford home insurance by looking at the following:

Home Insurance Discounts

Insurance companies are willing to talk about a lower premium if the homeowner has one or more of the following:

  • A security system acceptable under their standards including window and door dead locks
  • The dwelling is equipped with working smoke alarms and unexpired fire extinguishers. Fire extinguishers have a life span of 5 to 15 years depending on its type.
  • Length of ownership
  • And whether or not there is someone at home all the time

Home Insurance Group Schemes

Insurance companies also offer group discounts to certain groups of people like engineers or any other responsible professionals who the insurance company deems as trustworthy and unlikely to make a claim or cause damage to their property.

Other Ways To Lower Home Insurance Costs

  • Pay annually
  • Remove the unnecessary add-ons like pet cover and appliance repair