Paul Sanchez
In Texas, a child becomes a legal adult on their 18th birthday. This means that they are now responsible for their own life choices, care, and actions. One of the many changes that come with this transition is the child's health insurance coverage. While some children can remain on their parents' health insurance plans until the age of 26, others may need to purchase their own insurance plans. Life insurance, in particular, is a product that can be purchased from an insurance company, agent, or broker, and it provides financial protection for loved ones in the event of the policyholder's death. So, if you are 18 years old in Texas, you may be wondering if you can own a life insurance policy and what factors you should consider when making this decision.
What You'll Learn
Life insurance as personal property
Life insurance is a legally binding contract between an insurance company and a policy owner. The insurer guarantees to pay a sum of money to the named beneficiaries when the insured person dies. In exchange, the policyholder pays premiums to the insurer during their lifetime. The policyholder must pay a single premium upfront or regular premiums over time for the life insurance policy to remain in force.
In the state of Texas, a life insurance policy is considered personal property. This means that, much like any other item you own, you can sell it. However, there are some things to consider. For instance, life settlement companies—companies that buy life insurance policies—are primarily interested in purchasing high-value policies from older policyholders. Typically, you would need to be over the age of 65 and have a policy worth at least $100,000 to sell your policy.
Personal property refers to movable items that people own. This can include tangible items such as clothing, artwork, vehicles, furniture, boats, and collectibles, as well as intangible items like digital assets, patents, and intellectual property. Personal property can be insured in two ways: for its current value, taking depreciation into account, or for the cost of replacing it with a similar new item.
Homeowners insurance policies usually cover personal property at 50% to 70% of a dwelling's value. This coverage is often referred to as the home's "contents." It is important to create a list of your personal belongings, including items in your garage, closets, drawers, and other storage areas. Taking photos or videos of these items can be helpful in the event that you need to make an insurance claim.
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Whole life and term life insurance
In Texas, a life insurance policy is considered personal property. This means that you can sell it, but there are some things to consider before doing so. For example, life settlement companies—companies that buy life insurance policies—must be licensed with the Texas Department of Insurance. It's also important to be aware of potential scams and to check a company's license.
Now, let's delve into the differences between whole life and term life insurance.
Whole Life Insurance
Whole life insurance is a type of permanent life insurance that remains in effect for your entire life, provided you continue paying premiums. Some whole-life policies may pay out dividends annually, which can be collected in cash, added to the policy's cash value, or used to pay premiums. Dividends, however, are not guaranteed and may be lower than projected. Whole life insurance premiums are typically higher than those of term life insurance due to the savings feature and the longer coverage period.
Term Life Insurance
Term life insurance, on the other hand, offers protection for a specific period, known as a term, which can range from one year to 30 years or longer. You have the option to choose the length of the term. Term life policies provide a lump-sum death benefit to beneficiaries if the insured person passes away during the policy's term. It's important to note that term life policies are not designed to provide coverage for an entire lifetime. Instead, they are intended for specific periods, such as while raising a family or having children in college. Term life insurance premiums are generally lower for younger individuals and tend to increase with age and health risks.
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When to buy life insurance
The best time to buy life insurance is as early as possible. This is because the younger and healthier you are when you purchase a policy, the lower your premium will be. Each year you wait, your potential life insurance premium will likely increase. Waiting until you are 60 may mean a significant rate increase and limited policy options.
If you are single with no children, life insurance may not be a priority. However, if you have a family or are planning on starting one soon, or if you have debt that your estate would be responsible for should you die, you should consider a life insurance policy.
Life Insurance in Your 20s and 30s
You may be putting off life insurance to focus on paying off student loans, buying a home, or starting a family. However, if you were to pass away before paying off certain debts, your loved ones may end up responsible for those loans.
Life Insurance for Couples
Without life insurance, your spouse may be responsible for your debt if you pass away. If you support your partner financially, a death benefit could provide them with a safety net if you pass away unexpectedly. You can likely stick with a term policy that expires when you'll be debt-free or when you'll retire. But keep in mind future children and their education costs when choosing a term length.
Life Insurance When You Have Children
Once you start a family, your life insurance needs as a new parent can change. A term policy might still be the most attractive option, but your death benefit amount should likely increase. Consider how much money your spouse or partner would need to raise your children on their own, including higher education costs.
Life Insurance for Seniors
As an older adult, you should consider a life insurance policy for your retirement. Your projected income, financial obligations, and physical health when you retire can help you decide what type of policy and payout amount you need. Note that life insurance for smokers and people with medical conditions can be more expensive.
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Life insurance beneficiaries
In Texas, a child becomes a legal adult when they turn 18 years old, and this brings about several changes in the services they receive and how they get help paying for these services. For instance, health insurance coverage through an employer-provided or private insurance plan may end, although the child can stay on a family plan until the age of 26 if they are still financially dependent and have a disability that meets the criteria for receiving Supplemental Security Income (SSI) benefits.
Now, onto the topic of life insurance beneficiaries:
A life insurance beneficiary is the person or entity you name in a life insurance policy to receive the death benefit when the insured person passes away. It is important to always name beneficiaries, whether they are individuals or organizations. When choosing a beneficiary, you should identify them as clearly as possible, including their social security number, to make it easier for the insurance company to find them and to prevent disputes from arising.
You can choose to name a single beneficiary or have both "primary" and "contingent" beneficiaries. The primary beneficiary receives the death benefit if they can be found after your death, while the contingent beneficiary receives the benefit if the primary beneficiary cannot be found. If no beneficiaries can be found, the death benefit will be paid to your estate.
In addition to naming beneficiaries, you should specify how the benefits should be handled if one or more beneficiaries cannot be found. For example, if you have two children and each is named to receive half of the death benefit, but one of them dies before you, you may want the remaining child to receive the entire benefit. Alternatively, you may prefer that the deceased child's heirs receive their share.
There are several ways a beneficiary may receive a life insurance payout, including lump-sum payments, installment payments, annuities, and retained asset accounts. It is recommended to consult an insurance agent or estate planning attorney to determine the best payout option for your beneficiaries.
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Selling your life insurance policy
In Texas, a life insurance policy is considered personal property, and you can sell it much like anything else you own. However, there are a few things to keep in mind when selling your life insurance policy in Texas:
Life Settlement Companies
Life settlement companies are businesses that buy life insurance policies. In Texas, these companies must be licensed with the Texas Department of Insurance. It is important to be cautious of scams and only deal with licensed companies. You can verify a company's license by calling the Texas Department of Insurance.
Factors Affecting Sale Price
Life settlement companies typically buy high-value policies from older policyholders. Most companies will require a minimum policy value of $100,000, and the policyholder to be over the age of 65. Additionally, companies will often pay more if the policyholder has a health condition that reduces their life expectancy.
Premium and Death Benefit Considerations
Once a life settlement company takes over your policy, they will assume responsibility for premium payments. This means you will no longer need to make payments, but it also means that your family will not receive the life insurance benefits upon your death. Therefore, it is important to carefully consider the impact on your loved ones before selling your policy.
Tax Implications
The money obtained from selling your life insurance policy may be subject to taxes. Additionally, it could affect your eligibility for Medicaid and other forms of public assistance. It is important to consult with a financial advisor or tax professional to understand the potential tax implications before proceeding with the sale.
Alternative Options
Before deciding to sell your life insurance policy, it is worth exploring other options to access cash from your policy. For example, if your policy has accumulated a cash value, you may be able to withdraw money or take out a loan against the policy. Alternatively, if your policy has a cash surrender value, you can choose to terminate the policy and receive the cash value, although early surrender may incur charges.
Another option to consider is a policy with an accelerated death benefit, which allows you to receive a portion or all of the death benefit while you are still alive, provided you meet certain requirements such as having a terminal illness or a specified long-term illness.
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Frequently asked questions
Yes, you can own your life insurance policy at 18 in Texas. In fact, you can buy life insurance from an insurance company, agent, or broker.
Life insurance provides money to your family after your death to help them pay for burial costs, living expenses, bills, and education.
The cost depends on your age, health, and risk factors. It's usually lower for younger people.
You can buy life insurance from an insurance company, agent, or broker. You can also get group life insurance from employers and other groups, such as churches, unions, and associations.
