Life Insurance Primer: Know the Facts
When buying a life insurance policy, you must always have your five W’s with you: Who, What, Why, Where, and When. This means knowing who your insurer will be, what type of insurance you will get, why you must get insured in the first place, where to shop for an insurance premium, and when you should buy a policy. People buy life insurance to make sure that their loved ones are financially safe when they die and for this, they consider it as the greatest gift they can leave on Earth. If you are just starting to shop around for the right policy, you must have the right life insurance primer that will help you make a smart choice.
Life Insurance Primer: The Right Way to Shop for a Life Insurance Policy
Keep these five steps in mind, which you need to follow by the number:
1. Know how much you are willing to pay for your life insurance policy
2. Choose the most suitable policy that will meet your needs
3. Select among the best insurance companies that have the best financial strengths
4. Negotiate for the best prices in town
5. Learn ways on how you can save more money without sacrificing your life insurance benefits
Life Insurance Primer: Types of Policies to Choose From
Your life insurance policy can be categorized into two types, namely:
Term Life Insurance
This type of insurance is cheaper and more popular with people who want to pay for a certain time period. A lump sum shall be paid to the beneficiary of the insured person upon his or her death. What makes this a better choice is that there is no investment tied up with your life insurance and shopping for one is much simpler. You can choose to have a Level Term which gives you a fixed premium rate during the term of your policy, a Variable Term where insurance premiums can go up or down depending on the terms of the policy, a Renewable Term where you can simply renew your insurance coverage without you undergoing medical exams, or a Convertible Term where you have the option to convert your term policy into a permanent one.
Permanent Life Insurance
This type of insurance is more costly and complicated, since it combines with an investment feature of your policy. This means that your beneficiaries will have higher insurance benefits than those that they can receive from a term life insurance, which is due to the dividends they will receive from stock shares and more. Some of the most common kinds of permanent life insurance are Whole Life, Universal Life, Survivor Life, or Variable Life insurance policies. Whole life insurance is the most common of them all, where the cash value of the policy grows slowly over time, and beneficiaries may get death benefits – plus a cash value or return of investments. A universal life insurance offers more flexibility than term or whole life insurances, where the policy holder may increase or decrease their premium amounts and death benefits. A survivor life insurance is like a whole life insurance that covers two persons, where benefits are paid when both are dead. This type is good for paying estate taxes. Lastly, a variable life insurance lets your insurance company invest your premiums, where the value of the benefits will rely on how much yield those investments are making. If the cash value goes down, the beneficiary will be paid a minimum benefit amount upon your death.
Life Insurance Primer: Who Can Be Your Beneficiary?
When it comes to your life insurance policy, you can have:
1. Multiple Beneficiaries – by listing your recipients’ names and how much they will be receiving
2. Contingent Beneficiary – by naming a secondary beneficiary to your estate. This can be your spouse or children of legal age
3. Minor Beneficiary – means appointing a child under legal age and assigning a guardian who will take care of insurance claims when you die
4. Revocable Beneficiary – is a recipient that you can modify or delete from your insurance policy
5. Irrevocable Beneficiary – is a recipient whose name you cannot simply remove unless they consent to it. Also, creditors cannot control the policy or benefits of the recipients.
Life Insurance Primer: Choosing the Right Insurance Company
You can always check the financial strength of an insurance company with Standard & Poor’s, A.M. Best, or Fitch and Moody’s ratings. You need to ask what your insurance will cover and see if you can get the best prices around. You may also contact your local state insurance department to see it the company or insurance agent is licensed at your state. Always remember that nothing is for free when it comes to life insurance policies and never feel scared of reporting a scam or filing a complaint. Most respectable insurance companies will disclose to you information you need to know and will give you time to review your policy, or you get your money back – guaranteed. If you have already chosen the one you like, make sure you read the terms and conditions well, and take note when your policy will take effect.
This life insurance primer will help you get started on shopping for a life insurance that fits your budget, lifestyle, and life goals. When it comes to shopping for a peace of mind in the form of life insurance policies, there is no need to rush. Take Your Time and Choose Very Well!
RESOURCES:
Dave, Pooja. “ Life Insurance Distribution and Benefits. “ 2009. Investopedia, ULC.
http://www.investopedia.com/articles/pf/06/lifeinsurance.asp
Insure.com. “ Life Insurance Basics. “ November 2009. Queenstreet, Inc.
http://www.insure.com/articles/lifeinsurance/basics.html
Sturgeon, Julie. “ Just the Facts on Life Insurance. “ July 2008. Bankrate.com.
http://www.bankrate.com/finance/insurance/just-the-facts-on-life-insurance-3.aspx
Lending Tree, LLC. “ Life Insurance Primer. “ August 2007.
http://www.lendingtree.com/insurance/advice/life-insurance/life-insurance-primer/
