If you’re thinking of buying life insurance in Arkansas, this guide is for you!
Did you know that over the past decade, the number of people choosing life insurance has decreased? Almost half of all adults don’t hold a life insurance policy, which could leave their families feeling a significant financial hit if the household’s primary income earner were to pass away.
We hope that this complete guide to life insurance will help equip you to make the best decisions for you and your family.
Arkansas Life Insurance Specifics
The insurance industry is regulated by The State Code of Arkansas. The state uses this code to oversee claims and protect consumers in Arkansas. Some ways they do this include:
*Grace Period: A 30-day grace period on late payments must be given by all Arkansas policies issued in the state. Policyholders have thirty days to get premiums paid before the insurer can cancel the policy.
*Incontestability: All Arkansas life insurance policies are considered incontestable once the policy has been held for at least two years. (Exception: cases involving non-payment of premiums).
Life Insurance Overview
When it comes to life insurance, if you have people who depend upon you and your income and you are not independently wealthy– you need a life insurance policy.
Those criteria include most of America. But choosing a policy that’s right for you can be confusing.
Learn how to save money on car and home insurance in Arkansas as well.
In general, when selecting life insurance policies, you will be choosing from two types of policy:
Term Life vs. Whole Life.
Term Life Insurance
Term life insurance is generally less complicated than whole life, and comes with lower premiums.
The way term life policies work, you are guaranteed a specific sum in the event of your death– if your death occurs while the policy is still active.
For example: If you were to buy a 20 year term life policy when you are 30 years old, this means your family will only receive money from this policy if you die before the age of 50.
If your term life policy has a fixed annual premium, that’s the rate you will pay until your policy ends (20 years, using the above example).
Your premiums are dependent upon your health level at the time of purchase of the policy.
If your health changes after you buy the policy, those changes will not affect your rates (for the duration of your policy term).
Learn how leading a healthy lifestyle can help lower your insurance costs.
When the term is up, however, health changes can impact your renewal rates and/or your ability to renew at all.
Whole Life Insurance
Whole (or permanent) life insurance policies provide death benefits, just like term life policies. But unlike term life policies, whole life policies do not expire after a certain term.
If you opt for a whole life policy, you will pay the premium on that policy for your entire life.
Like a term life policy, you will have a specific death benefit value.
But unlike a term life policy, whole life policies also carry an investment component, providing a cash value that builds over time.
Because of this, whole life policies have higher premiums than term life policies. Because you’re paying more than a premium- you’re paying to build up cash value for the policy.
How Life Insurance Works
Whatever type of policy you choose, life insurance is a contract between you and an insurance company.
This contract obligates the insurance company to pay a set amount of money to your beneficiaries in the event of your death.
This payment can be used however necessary– to help cover the lack of your income, pay for funeral costs, etc.
Get a quote on your Life Insurance Now.
When Is Life Insurance Not Needed?
In general, there are a few groups of people who may not need life insurance:
*Unaffiliated people without dependents
*Older people with adult children
*Independently wealthy individuals
Some older people, even without dependents, still opt to carry a small life insurance policy to cover the cost of their funeral or the cost of an inheritance tax bill.
Is Life Insurance Taxable?
According to the IRS, if you are the beneficiary of a life insurance policy, the amount received does not have to be reported as income when you file your taxes.
Exceptions
If the payouts are received in installments, instead of a lump sum, the interest is taxable.
If the beneficiary is an estate (as opposed to an individual), an estate tax return may need to be filed, depending on how high the death benefit raises the estate value.
Also noteworthy:
Whole life policies will allow you to borrow against the policy’s cash value during your lifetime– tax-free.This will decrease the policy’s cash value over time.
If you borrow against your policy and don’t pay it back, whatever you owe will be deducted before your insurance company pays out the death benefit.
What Life Insurance Do I Need?
When deciding what life insurance you need, you’ll need to assess which type of policy best suits you.
Term life is especially useful during the years an unexpected death could be particularly financially difficult– when children are still young, or when your family still owes on a mortgage, for example.
Whole life policies are great when it comes to consistency, but keep in mind they are stricter than other policies.
While the value of a whole life policy is guaranteed, if you find yourself unable to make the payments, you will have to give up the policy entirely or depreciate it by borrowing against the cash value.
Because whole life policies cost more, buyers can be tempted to purchase less coverage than they actually need, in order to afford it.
But this isn’t serving the purpose you desire it to– so be sure you get enough coverage.
Conclusion
M & P Insurance has been helping provide the best insurance coverage for almost 100 years– at rates that suit your budget. We would love to help you find the right life insurance policy for you.
Feel free to contact us today.
Life insurance isn't for you,
it's for the ones you love
Life here in our Arkansas community is pretty great, isn’t it? As nice as it is, we know that–just as with all other kinds of insurance–anything can happen. That’s where life insurance comes in. It’s always in our minds to protect our loved ones.
At M&P Insurance, we will help you choose what’s best for you when it comes to the unthinkable—how to make sure your loved ones are covered in the event of your death; or, if you have a business, that your hard work is not going to crumble. We’ll also help you understand why you shouldn’t procrastinate about making this decision or purchasing the insurance.
