Life insurance is a financial product that’s designed to assist families and individuals when a loved one passes away. When purchasing life insurance, you name one or more beneficiaries, people or entities who receive a cash benefit from your life insurance policy.
When shopping for a life insurance policy, you want to find out the why, what and how of life insurance before looking too closely at any specific product. You can find a wealth of solid information about life insurance online from companies you trust to say it straight.
4 Common Questions About Life Insurance
1. Why buy?
One reason you may want to buy life insurance is to offer yourself and your loved ones a little peace of mind. Life insurance provides some financial assistance for living expenses or bills you may leave behind. Beneficiaries can use life insurance money for other types of expenses too, including estate taxes, funeral expenses, and education.
2. What’s the best kind of life insurance policy?
Shopping for the right policy to meet your specific situation can feel like a daunting task, especially if you’re over 50 years old. You may worry about a required medical exam or expensive premiums. With so many options and details to consider, there is no specific kind of life insurance policy that is right for everyone. Be sure to do your research before you make your purchase.
In general, it may help to know that there are two main types of life insurance: term and permanent.
• Term life insurance covers you for a certain period of time, usually 10, 15 or 20 years or up to a certain age, such as 80 years old. If you pass away during this term, your beneficiaries receive the value of your policy. Term life insurance is often more affordable at issue than permanent life insurance, but premiums increase at the end of each term.
• Permanent life insurance, as the name implies, covers you for the duration of your lifetime. This type of policy usually accumulates a cash value, which may be borrowed against in the future. Premiums usually remain the same for the life of the policy.
3. How can I be sure I don’t pay too much for life insurance?
When you begin thinking about buying life insurance, sit down and consider what expenses your loved ones may need to cover if you pass away. Also, take a good hard look at your budget and figure out how much money you can afford to put toward a monthly life insurance premium without creating hardship in your everyday life.
Finding the balance between the coverage you want and how much you can afford can provide you with a clear choice. This exercise can help you get a realistic sense for the kind of life insurance you’re in the market to buy. Next, shop around. Rates vary from insurance company to insurance company. If you can’t deliver the stars and the moon, don’t worry, few people can. Providing your family with some life insurance coverage is far better than none.
Whatever you do, avoid any temptation to misrepresent any aspects of your life or health — even if doing so reduces the cost of your premium. Fess up to your less-than-stellar vices because dishonesty could ultimately negate your entire policy when your family needs the coverage most. Don’t risk it.
4. Where can I find reliable recommendations for good insurance companies?
Just as you probably do when shopping for other kinds of products and services, ask people you trust for
recommendations about good life insurance providers. Also find out what companies are endorsed by groups to which you belong. After you filter all the advice you get from family and friends, check impartial ratings from sites like A.M. Best or Moody’s Investors Service.
When you find a company and policy that feels right, ask questions until you fully understand the product and its terms. The point of buying life insurance is to provide peace of mind. Do your research and find the life insurance coverage you need, on your budget and with a company you trust.