Erasing Confusion When Purchasing Life Insurance
Knowing which life #insurance policy to purchase can be daunting. Since the threat of COVID 19 almost one year ago, the need for life insurance has become more apparent, and finding the right policy to meet your needs even more elusive.
We make the following suggestions for you to consider when purchasing a life insurance policy.
Consideration 1: What is your current financial reality? You must know what is before you can decide what you may need. Consider what coverage you have currently if any. Do you have retirement which would pay out should you pass before you’ve reached retirement age? If you’re purchasing your home, did you buy mortgage insurance when you bought your house? Do you have credit card balances that you cannot pay off each month? Are you putting money away for your children’s college education? In other words, know what you currently have so that it can help you with consideration #2.
Consideration 2: Determine what you will need in life insurance should something happen to you. If you have a spouse, you will want to do the same for them whether they work or not. If they are the primary care giver for small children that is a #cost you will incur if something happens to them. When you are considering how much insurance you will need along with the major indebtedness, consider what it costs each month just to live, not even take advantage of vacations or unexpected expenses. A general #guideline is that a death benefit should be approximately 10 times your annual salary. However, when looking at your personal situation you may decide on an amount more or less that this dollar.
Consideration 3: There is a difference between “term” and “whole life” insurance. Term insurance is really a form of death insurance. It is good for a specific term or period of time, providing you make your premium payments. When the term is complete, if you are still alive, you receive nothing. Should you pass away, your #beneficiary will receive the amount of the policy. Another type of policy is Return of Premium. This policy works much like a Term Policy, however, you will pay more and at the end of the term, your premium will be returned to you, without interest. This kind of policy can act as an interest-free forced saving. The advantage is your peace of mind knowing you are covered. A third type of insurance can build cash value which you may utilize at retirement of through a loan. You need to know which type of policy will meet your needs.
Consideration 4: Shop around. The advantage of going with an independent agent is that they have access to a number of insurance products through a number of the most reputable carriers. They can help you select an insurance product that will best meet your needs.
Consideration 5: We shouldn’t need to say this, but it is important that you are truthful on your application. You want to disclose any medical information which is pertinent as well as information regarding your driving record. Insurance companies can, and will, cross check the information you provide them.
Next week we will provide some additional clarification to help erase confusion about selecting the right life insurance policy.