What are the major things to know about life insurance policies? what are the two main types of life insurance? What to look for when buying insurance? When shopping for life insurance you should look for? What is life insurance and how does it work? If you looking for the things to consider before buying a life insurance or to get a life quotes online, then you have reached the right place. Here are some suggestions for getting a low cost life insurance quote whether you have a current policy or are thinking about to buy life insurance.
You must know while knowing the instant online life insurance quotes for you or your household members. Cheap term life insurance quotes are simple to get. In fact, term life insurance is the cheapest type of life insurance you can purchase. You can then protect your family and company get 10-year term life insurance quote immediately. Moreover, you can also think about short term life insurance quotes accordingly your budget. The disposition charges may not be necessarily legal expenses, but they certainly will be moral expenses.
It's doubtful that your friends, co-workers, or fellow church members are going to let your body go through a state disposal program. They will see to it that you have a proper burial, and that is not free. The same thing goes for your family. Many families are forced to come together and pay for final expenses of a lost loved one because there were no life insurance proceeds available to pay the expenses.
For those individuals that own a business or maybe a partner in a business, there are always severe financial consequences when you die. You can mitigate those consequences by buying life insurance enough that will allow your spouse, loyal employees, or surviving partners to continue in business. In each case mentioned here, life insurance is the most affordable vehicle to provide the funds needed when you depart this world. This articles about life insurance will clear everything you need to know about life insurance. Check out the life insurance tips and advice before purchasing life insurance.
Top 10 Factors To Consider When Buying Life InsuranceCheck out 10 most important things to know before you buy life insurance:
1. What do you want your life insurance to do for you?If you are considering purchasing life insurance, you should understand WHY. Without knowing the “why” how can you possibly understand which product will best meet your needs and how much coverage you should buy? If you want to cover debts, provide a replacement income for your family, or make sure there is money for college tuition, you will probably consider term life insurance because of its low cost for a lot of coverage.
If you just want to make sure there is enough money to pay your final expenses when you die, you’ll be better served with Whole Life because you can purchase a lower death benefit and the policy will last as long as you do. How can you know what to buy if you don’t understand why you are buying it?
2. What are the different types of life insurance?To make matters even more confusing, there are three basic types of life insurance: Term, Whole Life, and Universal Life. But it doesn't stop there. There are many variations of these three policies, and there are riders (options) that can be added to all three.
Here is your starting point:
- Term Insurance is temporary life insurance that covers only for a period of time you select; 5, 10, 20, 25, and 30-year time periods. It is inexpensive because the periodic premium only covers the cost of the death benefit and thus the policy builds no cash value.
- Whole Life Insurance is permanent, meaning it will last for the lifetime of the insured as long as the premiums are paid. The death benefit is guaranteed as long as there are no outstanding loans and the periodic premium is guaranteed not to change even if you become ill or are confined to a nursing home.
Whole Life policies build cash value over time and earn a guaranteed interest rate that is established by the insurance company. As the cash value accumulates, the policy owner can access it through policy loans or use it to buy additional coverage.
- Universal Life is permanent insurance that is similar to a term policy with a savings account attached. Part of the premium you pay goes toward the cost of the life insurance, and the part goes into the savings account. The savings account earns a minimum interest rate established by the company, and it can earn additional interest if the company's investment portfolio performs better than the minimum expectations.
Like Whole Life insurance, Universal Life builds cash value that can be accessed through policy loans or partial surrender. Universal Life is also flexible and will allow the policyholder to adjust the face amount and monthly premium depending on their circumstances.
3. Which insurance product will best meet your needs?We can compact this information by matching up the type of insurance with the need it resolves. In fact, we have to compact this because it could possibly go ten pages and we certainly don’t want to get way out in the weeds and put you to sleep.
|NO.||The Need||Type of Insurance||The Reason|
|1.||Cover debts like mortgage, credit cards, and auto loans.||Term Insurance||Like Term insurance, debts are normally temporary, and term insurance is the most affordable way to cover them.|
|2.||Income replacement and living expenses for loved ones||Term Insurance or Universal Life Insurance||These needs can be lumped in with your debt coverage or covered separately in a UL policy because they will likely be permanent.|
|3.||Pay off mortgage||Term Insurance – Mortgage Protection Plan||A term policy in the amount of your mortgage can be purchased for 15 or 30-year terms to match your mortgage.|
|4.||Final Expenses like funeral and burial expenses and unpaid nursing home bills||Whole Life||Since final expense policies generally have lower face amounts like $25,000 – Whole Life will work better, and it’s permanent guaranteed coverage.|
|5.||Retirement Planning||Universal Life or Indexed Universal Life||These policies provide a death benefit and a cash account that earns interest based on certain market indices and allows the policyholder to accumulate significant cash over time.|
As we previously mentioned, selecting your type of insurance that best accommodates your needs can take considerable pages to thoroughly discuss it. This is where your independent agent comes in. A reputable and experienced insurance professional will take the time necessary to discuss your life circumstances and help you choose the appropriate insurance product that will offer the best solution.
4. How much insurance do you need?Insurance agents that keep track of “frequently asked questions” will all agree that this question is always in the 'Top Five Life Insurance Questions'.
Knowing how much insurance coverage you need is probably the most important question that must be answered before anything else. You certainly don’t want to buy more coverage than you need or can afford, but not having enough insurance is even worse. It’s really very simple. If your family is going to need $500,000 in the event of your death, and you have purchased only $400,000 in coverage, your family will be left with some tough financial decisions:
- Do we not send one of the children to college?
- Do we not pay off the mortgage and hope we can keep up with the monthly payments?
- Do we forgo the retirement program?
A reputable and qualified agent will be extremely happy to help with this or, you can calculate it yourself using an insurance needs analysis calculator (lifehappens.org). It’s important that when you calculate your insurance needs, if you cannot afford to purchase enough to cover the entire amount, at least buy as much as you can comfortably afford.
5. How much can you afford to spend on insurance each month?You would think this would be a question everyone has answered from the get-go but in most cases, people shopping for insurance do not know what it will cost and they certainly don’t know how much they need. The process is: know what you need so you can know what it costs.
Fortunately, for insurance shoppers, most agent websites have a quote engine available that will allow shoppers to enter basic information (nothing sensitive), and get a monthly estimate for the coverage they need. It’s important to remember, however, these quote engine's quotes are typically not exact because underwriting questions, if any, are minimal.
Finally, it’s important to buy as much insurance coverage as you can comfortably afford. For most individuals and families, when financial problems rear their ugly head, life insurance is considered a luxury and is canceled or borrowed against; when in fact, your life insurance should be a priority and as important as paying the water or electric bill. It's just that important!
6. Do you have insurance now, and if so, will you be replacing it or keeping it?This is important! If you are currently insured, you need to consider that coverage when you prepare your needs analysis. But when you consider any life insurance you have through your employer, it’s best not to count it. Here is why.
In most cases, group life or employer-sponsored life insurance plans are not portable. This means if you leave or get laid-off or dismissed from your job, your life insurance will not follow you. This can be a precarious position to be in because it’s likely that purchasing an individual life insurance policy can be a substantial challenge if your overall health during your employment years has degraded.
In every case, if you’re considering replacing an in-force life insurance policy for another, always discuss this thoroughly with your agent, and by all means, never cancel an in-force policy until the replacement policy has been issued. If your current coverage (not through work), has been in force for more than five years, you’ll never buy less expensive coverage, unless you were taken advantage of, when you purchased it.
7. Do you have any major health issues that might present a challenge or have you been declined coverage in the past?In almost every case, current or past health issues will not prevent you from buying life insurance, but it will affect what type of life insurance will offer the best solution and which company your agent should use.
If you have health issues (many people do) such as diabetes, Hep C, COPD, or a recent history of cancer, it’s very likely your agent will need to shop your case with insurance companies that specialize in high-risk applicants. Your agent will need to know about your health history and lifestyle so he or she can set realistic expectations for you regarding the type of insurance that will be most available and how much you should expect to pay for it.
Fortunately, in today’s life insurance marketplace, many insurance companies are offering policies without requiring a medical exam which will make the shopping and purchase process much easier than ever before. Because of 21st century technology, your insurance underwriter can learn a lot about you without a medical exam. This allows for faster and easier issuance of your policy.
8. What are riders and which ones should you add to your policy?According to the folks at Investopedia, a great resource for anything “insurance” or “financial,” - an insurance rider is “an add-on provision to a basic insurance policy that provides additional benefits to the policyholder at an additional cost”. Standard policies normally leave little room for adjustment or customization beyond selecting the deductibles and coverage amounts. Riders help policyholders create insurance products that can satisfy their specific needs.
Simply put, insurance riders broaden your coverage and are the tools for you and your agent to use to make your life insurance policy perform specific to your needs. Here are the riders that are commonly available for Term Insurance policies:
- Accelerated Death Benefit: The Accelerated Death Benefit provides for the company to pay a portion of the death benefit to the insured if he or she is diagnosed with a terminal illness that is likely to cause death within one or two years.
- Waiver of Premium Rider: Waiver of Premium provides for the insurer to waive periodic premiums if the insured becomes disabled and is unable to work.
- Accidental Death Benefit: This rider provides for the insurer to pay a multiple of the death benefit (usually double) if the insured dies as a result of an accident.
- Additional Insured Rider: This rider allows the insured to add an additional insured, such as a spouse to the policy with a maximum limit of the insured’s death benefit.
- Child Term Rider: This Children’s Term Rider enables the policyholder to ensure all children and upcoming children born or adopted to the policy for a time period named by the insurer.
- Return of Premium: The Return of Premium rider provides for the insurer to refund all premiums paid to the company if the insured outlives the term of the policy.
- Term Conversion Rider: Probably the most important option available with term insurance, the Conversion Privilege allows the policyholder to convert a portion or all a term life policy to permanent insurance without evidence of insurability. Simply put, your health is not a factor when you elect to convert your policy.
9. Should I buy my insurance directly online or use an agent?This question comes up more often than you might imagine. There are insurers today who are offering boiler-plate insurance policies that offer only a death benefit and are usually never underwritten. No underwriting means higher rates, plain and simple. Why would you consider buying a cookie-cutter insurance policy that may or may not be sufficient for your needs when you can hire an experienced independent agent to represent you for free?
Insurance agents are almost always paid by the insurance company, they will be available to you year after year, and they can be held responsible if things go terribly wrong between you and the insurer.
10. Should I use a career agent or an independent agent?Career agents are licensed just like independent agents. The difference between a career agent who typically represents only one insurer and an independent agent who represents many insurers is similar to shopping in a convenience store versus a supermarket. The convenience store offers a limited selection of products, and they are almost always priced higher than the supermarket.
Independent agents represent their client and prospective client’s needs first and foremost; whereas career agents hold their allegiance to one insurance carrier that controls what they sell and how much they can sell it for. If your needs fall outside their insurance box, they simply cannot offer a solution.
Learn and Know what you don’t KnowCertainly, with any financial transaction, you must make informed decisions and have your eyes wide open before you commit resources to the transaction. Yes, buying life insurance is a financial transaction, but it may likely be one of the most important transactions that you'll make during your lifetime.
How many transactions will you make that can affect the financial stability of your family after you’re gone? How many transactions will you enter into that will provide your family a source of income, pay existing debts, eliminate your mortgage, or provide a college education for your children?
When you consider purchasing life insurance, isn't it better for all parties if you take part in the transaction well-informed and with realistic expectations? Of course, it is.
Bottom LineThere are many cases in our life when we might not be sure if the decision taken by us is right or wrong. However, luckily, getting a life insurance policy won't be one of 'em. I should recommend, always try to compare various types of Insurance Policies. Be 100% sure about whether you are capable enough to pay the premiums/installments. Everyone who is head-of-the-table of the family should be aware of a term Insurance of all the costs which he/she is liable for. As this is a perfect tax saving scheme.
One more quick suggestion from my side, learn what to do once you have the plan ready and you wanted to change your mind later. Seek insurance agent help, try to evaluate the future of the policy that you are buying.
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