Life Insurance. It’s one of those things no one really wants to talk about, but everyone has to.
You need insurance for protection against accidents, coverage in times of need, and security when your financial situation becomes vulnerable. While regular insurance can cover car repairs, medical bills and home repairs, life insurance can make sure your family will still be provided for and left money to live on in case something happens.
In this article, you’ll learn the best tricks to make sure your life insurance policy is prepared to take care of you and your family. You can consider this your quick guide to life insurance.
Term Insurance Only
You should never buy any sort of life insurance that is not term insurance. Permanent or “whole life”, as some insurance agents are now calling it, is nothing more than a scam-like, highly complex product put together by insurance companies so they can charge large commission fees off you.
The premise of the claim is that the payments you make into the policy build cash value (almost like an investment) which you can later use as collateral for loans or payment for your monthly insurance premiums. You can also withdraw them out as cash, too.
However, the amount of money you pay to have this “inner-policy” cash value is actually more expensive compared with the fee that you have to pay to own it.
In reality, the monthly premiums are almost always so much higher than for a similar term policy. This can end up with you losing money with a whole life policy, even if it seems like you are “investing”. This can be a good option for some individuals, but might not work for everyone.
Buy Term With A Renewability Feature
Term insurance is dirt cheap so there’s no reason not to buy it. When you do, make sure it has a “renewability” feature attached to the policy. This feature will allow you to renew your policy without the need to provide evidence of insurability again.
This can be incredibly useful, especially if you experience health problems later in life. If these health problems showed up on an EoI doctor’s report, your rates for a future term insurance policy would be higher.
Be sure to ask about the policies’ coverages as you go through your options.
Cover 10X Your Current Income
No one likes to buy insurance. However, since it’s meant to secure your family in the event you die, it still makes an essential investment.
Because of this, you should purchase a policy with a face value that is, at least, ten times your current income level. Thoroughly review your financial capability and make sure you can afford and are prepared to invest in this kind of insurance.
It shouldn’t take up too much of your paycheck, but it should still cut off a chunk of it. Make sure that you still have enough funds in case your family experiences an emergency. A financial planner can help you with this.
If used wisely, your family could invest the insurance money and make it last as they search for jobs. In case you invest in less than ten times your current income, it will be difficult to stretch the money over a number of years.
Be sure to research all types of policies and keep your options open. Just by knowing what you have available and what you qualify for can make the initial process easier. You can use the information as a guide to life insurance.
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Author: Eileen O'Shanassy
Eileen O'Shanassy is a freelance writer and blogger based out of Flagstaff, AZ. She writes on a variety of topics and loves to research and write. She enjoys baking, biking, and kayaking. Check out her Twitter @eileenoshanassy. For tips on moving and for typical costs to ship a car check out these ideas.