Immigrate to the United States Learn about life in the United States guides: Since the first insurance policy was issued in the United States in 1762, life insurance has developed significantly in the U.S. Currently, there are many types of life insurance offered by U.S. insurance companies.
1. Types
The first category is term life insurance. As the name implies, this type of insurance only covers a specific period, such as 10, 15, 20, or 30 years. This type of insurance is temporary and primarily provides a death benefit. If the insured dies within the term, the benefit can be paid out. However, if the insured dies after the term expires, the insurance usually expires.
The second category is whole life insurance, sometimes also called permanent life. This type of insurance has tax-deferred features, and as time passes, the cash value within the insurance increases. If the policyholder wishes to cancel the insurance early, they can also retrieve a certain amount of cash. Its cash value is guaranteed. The coverage amount for this insurance is fixed, and if the insured passes away within the term, the insurance company pays out the face value. If the insured reaches the age of one hundred, no further premiums are required.
The third category is universal life insurance (UL). This type of insurance is relatively flexible; the policy owner can pay premiums at any time, with the amount being more or less, provided that a minimum payment level is met. It also has a cash value, which is the premiums paid and earnings minus insurance costs and fees. This type of insurance can guarantee the death benefit, but the cash value is not guaranteed.
The fourth category is variable universal life insurance. This type of insurance provides a death benefit and cash value, but the amounts vary based on the results of investments in stocks and bond funds. These funds are managed by the life insurance company itself, and the policyholder can choose the types of investments. Due to investment risks, the death benefit may increase or decrease, and the cash value is not guaranteed.
2. The Different Roles of Four Parties
When a life insurance policy is signed, it involves several parties. Needless to say, the insurance company is one of them. If the insured dies, the insurance company must pay the claim. At the same time, on the side of the insured, there are four parties involved.
Life insurance involves four parties. The first is the owner. The owner has the most power and can change the beneficiary. The insurance company usually only communicates with the owner. The second is the insured. The insured cannot be changed, and the premium amount is determined based on their age, health condition, and risk. The third is the payor. The payor pays the premiums. The fourth is the beneficiary. If the insured passes away, the beneficiary can receive the death benefit.
There is a lot to learn about these roles; the first three roles might be the same person, and the owner might also be the beneficiary. If the payor and the owner are not the same person, and the annual payment exceeds $12,000, gift tax must be paid. If the owner needs to apply for government benefits, such as Medicaid, they may need to relinquish their status as the owner.
3. Consolidating with One Company to Enjoy Benefits
Because there are many life insurance companies and plans, choosing the right insurance company and plan is not easy. Moreover, insurance agents and independent insurance brokers often have conflicting advice, making it even more difficult for the general public to choose. Some industry insiders believe that purchasing several products from one company is a good choice.
There is no absolute good or bad in insurance types; each plan has its own strengths, and it is better to combine these different plans. For some policyholders, it is recommended to buy products from large companies because small companies may not be able to afford the claims.
4. Progressive Approach from Less to More
Consumers sometimes find it difficult to determine what kind of life insurance is most suitable for them. Therefore, some insurance consultants believe that if one is not currently financially well-off, it is worth considering starting with a small policy and adding more as the financial situation improves.
A special reminder to Chinese policyholders: distinguish between certain concepts. For example, the guarantee and assumption on a policy are different. The former is ensured, while the latter is not necessarily so. Some Chinese people also easily confuse insurance savings with bank savings; bank savings guarantee the return of the full deposit and interest, but life insurance is different. If terminated early, one may only receive a portion of the premiums paid.