Life insurance isn't something most of us like to think about, but it can be very important. It provides financial security for your family in the event of an accident or illness. As soon as people depend on us, we have to start asking what's going to happen in the event of a tragedy. An untimely death could be more than just a sad occasion. Without the right protection, it could be a financial disaster. Unfortunately, buying the right life insurance can be really tricky. There are many options and types of insurance to choose from, and deciding which one is best may be intimidating. Here's what you need to know about buying life insurance.
There are several ways to get a life insurance policy. The old fashioned way is to talk to an insurance agent, who will help you find the perfect policy for you. However, an agent may not have access to the whole range of plans. You can also talk with your financial planner about life insurance plans you're interested in purchasing, or apply online and do the shopping on your own. While you can get some real deals by doing your own shopping, you also leave yourself open to choosing incorrectly. There's no one to tell you when a plan is a bad idea. This technique is best for people who already know what they're doing.
Life insurance comes in two basic types - term and whole. Term life insurance policies cover a specific time period, usually between one year and thirty years. When the person being insured dies, the face amount of the policy is paid to the person designated as the beneficiary. If the insured doesn't die during the term, there is no money back. Term policies are much less expensive than whole life policies, and can be a good choice for younger people who want to protect their families. Once the kids have left the nest, there's no reason to keep the policy. Rates for term policies are famous for being high if the insured is older than forty, but this is changing. Good rates are now available for healthy people in their forties and fifties.
The other option is a whole life insurance policy, also known as permanent life insurance. It protects you from day one until the event of your death. It also includes a savings component - usually in the form of money market investments, stocks, or bonds. This type of policy builds value, and can actually be borrowed against. These policies are more expensive and tend to include high commissions and fees. They come in three types: variable, traditional, and universal policies.
You may already have a life insurance policy, but are worried it's not the best one. You might be paying too much or not getting enough out of it. Just like someone who doesn't have a life insurance policy, you might need to shop around. Take your time and be willing to do a little bit of research. That's the only way to be certain you're really getting a good life insurance policy.
Do you need life insurance at all? Single people who have no dependents won't get much benefit out of life insurance, and many couples without children won't need a plan, either. You usually won't need to insure young children or anyone else who isn't producing an income. The important time to get life insurance is if you have children who will need your support, or if you have a spouse who doesn't have a job of his or her own. Then, there are people depending on your income, who will be in trouble if it disappears.
How much life insurance do you need? One common rule is to choose a plan that pays out five to ten times the amount you normally make in a year. There are online estimators that can help you figure out how much coverage you really need. Don't buy too much - it can be too expensive to be worth it in the long run. Remember to check your budget before you commit to a premium - you have to keep paying throughout the term or you'll lose your coverage. A few policies have safety features built in, but they can be very expensive.
If you ever plan to have life insurance in the future, never let a policy lapse. Insurers will be reluctant to offer a plan. Check out all companies to make sure that they're stable enough to support your insurance, too. You'll be throwing your money away if you choose insurance with a company that's not financially stable. Avoid no-exam policies which can be very expensive. How can you reduce the amount you'll pay? Insurance premiums are based on the amount of risk the insurer thinks they're taking by insuring you. This means that the price you pay will be dependent on your health and habits, how old you are, and even some of your hobbies. Be willing to take a medical exam, but be sure you're in the best shape you can be. If needed, stop smoking and reduce your weight in a healthy fashion to encourage insurers to charge less. You should also ask your agent or advisor about discounts - he or she isn't likely to volunteer them. Try purchasing bulk coverage, as well. Increments of two hundred fifty thousand dollars are often less expensive than other plans. Make sure your credit is in good shape, as well. Your risk factor is based in part on your credit history.
Never depend on life insurance that only comes through the employer - if you change jobs or can't work, you won't have any coverage. Keep on the lookout for hidden fees and keep an eye on your policy. Remember that one policy won't necessarily be the right fit for your whole life. Keep your documents where they'll be safe and never sell your life insurance policy without careful research. These tips will help you get the most out of your life insurance and help keep your family safe.