Life insurance has grown to become an important part of financial planning among people in San Antonio. The total number of life insurance policies in force all over America by 2015 was 280.82 million. Insurance experts note that the number of life insurance policies in force still have not recovered to the peak of 330 million policies in force in 2008. This statistic shows Americans have cut expenses at a time of financial crisis by discontinuing life insurance policies. While the regulators and insurers are confident of a gradual return to pre-crisis numbers, we can work out the importance of life insurance in an earning person’s financial planning.
In simple terms, life insurance is a contract between an insurer and a policy holder where the insurer receives regular payments known as premium. The insurer invests the premium it gets from all its policyholders on securities like stock and bonds. In exchange the insurer promises to pay a lump sum in the event of the policyholder’s death. A life insurance policy runs for a particular period of time or until the death of the policyholder, whichever is earlier. The premium is set depending on the policyholder’s age and health, as well as other factors like occupation.
In all life insurance policies, the insurer pays a lump sum if the policyholder passes away from an accident or illness during the term of the policy. There are broadly two kinds of life insurance- participating and non-participating. Participating life insurance policies pay out a sum to the policyholder on reaching the maturity date. So these insurance policies are like an investment where the policyholder expects a return on the premiums paid by her. These policies are further classified as endowment policies and whole life insurance policies. Non-participating life insurance policies do not pay out anything to the policyholder if they are alive on completion of the policy term. These policies are also known as term life insurance. There are some insurance policies that pay a third party in case of the policyholder’s death. For example, mortgage insurance pays the remaining mortgage on mortgaged property in case of the mortgager’s demise. Key man insurance is used by corporate and businesses to insure against the risk of an important employee’s death.
Which life insurance policy should one choose?
There can be no ambiguity on which life insurance policy is the cheapest: its term life insurance. These policies are cheap because the insurer does not have to pay a return to the policyholder on maturity. So in most cases the insurer gets to retain the premiums paid by policyholders as death rates are low. Whole life polices and endowment polices are costlier per dollar of coverage than term life polices because some amount of the premium along with a suitable gain has to be paid to the policyholder on the policy’s maturity date.
Financial planners recommend buying term insurance and investing the amount saved in long term stock purchases and bonds for a healthy financial life. If you are in San Antonio, meet a good insurance agent today to decide your insurance needs.
The Harrin Group is an independent insurance agency in San Antonio, TX offering customized and affordable life and health insurance ( harringroup/life-insurance ), key person insurance, annuities, retirement solutions and dental insurance to individuals and businesses from top insurance carriers. To know more, visit harringroup.