NJ Life Insurance Term vs. Permanent
NJ Life Insurance
NJ Life Insurance Rates
Choosing a life insurance product is an important decision, but it can be complicated. As with any major purchase, it is important that you understand your family's needs and the options open to you for NJ Life Insurance Quotes
NJ Life Insurance Basics
Life insurance is the foundation of a sound financial
plan. It provides financial security for your family by protecting your
financial resources, such as your present and future income, against
the uncertainties of life.
Choosing the Amount Simply stated, you should elect an amount of life insurance that is determined necessary to meet the needs you are trying to satisfy. To be over insured can negatively affect your budget and long range financial goals almost to the degree that being underinsured can. While each person must individually assess their responsibilities, life situation and comfort for risk, it is important to be careful to choose an amount of life insurance that reflects your specific circumstances without underinsuring or over insuring.
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NJ Life Insurance Important Facts
insurance is a contract between the policy owner and the insurer,
where the insurer agrees to pay a sum of money upon the occurrence of
the insured's death. In return, the policyowner (or policy payor) agrees
to pay a stipulated amount called a premium at regular intervals.
As with most insurance polices, life assurance is a contract between the insurer and the policy owner (policyholder) whereby a benefit is paid to the designated Beneficiary (or Beneficiaries) if an insured event occurs which is covered by the policy. To be a life policy the insured event must be based upon life (or lives) of the people name in the policy.
Life policies are typically presented as types legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to war, riot and civil commotion.
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Temporary or Term life insurance provides for life insurance
coverage for a specified term of years for a specified premium. The
policy does not accumulate cash value. Term is generally considered
"pure" insurance, where the premium buys protection in the event of
death and nothing else. The three key factors to be considered in term
insurance are: face amount (protection or death benefit), premium to
be paid (cost to the insured), and length of coverage (term).
Various NJ insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or increase. A common type of term is called annual renewable term. It is a one year policy but the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time. Another common type of term insurance is mortgage insurance, which is usually a level premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owner’s residence so the mortgage will be paid if the insured dies.
Guaranteed renewability is an important policy feature for any prospective owner or insured to consider because it allows the insured to acquire life insurance even if they become uninsurable. Term life insurance is a straightforward protection business. A policy holder insures his or her life for a specified term. If he or she dies before that specified term is up, the estate or named beneficiary (ies) receive (s) a payout. If he or she does not die before the term is up, nothing is paid out an the contract ends.
Policies typically contain exclusions for where a policy holder has a pre-existing condition of which he later dies. In the past these policies would almost always exclude suicide. However, after a number of court judgments against the industry, payouts do occur on death by suicide (presumably except for in the unlikely case that it can be shown that the suicide was just to benefit from the policy).
Permanent life insurance is life insurance that remains in force until the policy matures (pays out), unless the owner fails to pay the premium when due (the policy expires). The policy cannot be cancelled by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law (usually two years). Permanent insurance builds a cash value that reduces the amount at risk to the insurance company and thus the insurance expense over time. This means that a policy with a million dollars face value can be relatively inexpensive to a 70 year old because the actual amount of insurance purchased is much less than one million dollars. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value.
The three basic types of permanent insurance are whole life, universal life, and endowment.
Whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy. The primary disadvantages of whole life are premium inflexibility, and the internal rate of return in the policy may not be competitive with other savings alternatives. Riders are available that can allow one to increase the death benefit by paying additional premium. The death benefit can also be increased through the use of policy dividends. Premiums are much higher than term insurance in the short-term, but cumulative premiums are roughly equal if policies are kept in force until average life expectancy.
Cash value can be accessed at any time through policy "loans". Since these loans decrease the death benefit if not paid back, payback is optional. Cash values are not paid to the beneficiary upon the death of the insured; the beneficiary receives the death benefit only. In many policies, however, the cash value has been automatically used to purchase additional death benefit, meaning that the beneficiary is likely to receive more than base death benefit plus cash value.
Universal life insurance (UL) is a relatively new insurance product intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for a higher internal rate of return. A universal life policy includes a cash account. Premiums increase the cash account. Interest is paid within the policy (credited) on the account at a rate specified by the company. This rate has a guaranteed minimum but usually is higher than that minimum. Mortality charges and administrative costs are charged against (reduce) the cash account. The surrender value of the policy is the amount remaining in the cash account less applicable surrender charges, if any. With all life insurance, there are basically two functions that make it work. There's a mortality function and a cash function. The mortality function would be the classical notion of pooling risk where the premiums paid by everybody else would cover the death benefit for the one or two who will die for a given period of time. The cash function inherent in all life insurance says that if a person is to reach age 95 to 100 (the age varies depending on state and company), then the policy matures and endows the face value of the policy. Actuarially, it is reasoned that out of a group of 1000 people, if even 10 of them live to age 95, then the mortality function alone will not be able to cover the cash function. So in order to cover the cash function, a minimum rate of investment return on the premiums will be required in the event that a policy matures. Go to NJLifeInsurance.Org Homepage
Finding a Good Policy
When shopping for a life insurance policy, you determine the guarantees on premiums, death benefits, expenses, cash value, mortality changes, and cost of insurance. It is critical to get all promised guarantees in writing.
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