There are many things to consider when thinking about buying a life insurance policy. You must determine how much coverage you will need, when to buy, what term and what type of policy. It can almost seem overwhelming as you are just beginning to gather the information from which to make your decision. Here are some important things you should know as you begin your life insurance purchasing process.
1. There are essentially two types of policies.
You can consider purchasing either a term policy, otherwise known as pure insurance coverage, or you can go with one of many types of whole life policies which will combine an investment product with a pure term life insurance policy to build cash value. You will need to determine which of the two is right for you.
2. Insurance is something that is sold, not something that is bought.
Agents sell the vast majority of life insurance policies written in the U.S. because the life insurance industry has a vested interest in pushing high-commission (and high-profit) whole-life policies. Consider what is in it for you, not your agent, when you are looking at which policy to purchase.
3. Whole life policies can be more expensive.
A whole life insurance policy that has an investment component added in can cost many times more than a simple term policy. The risk with this is that many who purchase these types of policies often buy less coverage than what they need because of the cost. This can leave the purchaser underinsured.
4. Whole-life policies are built on assumptions.
Agents have to base the returns they quote you on guesses, not reality. In order to attract buyers, these guesses can error on the higher side. Remember that the quotes with whole life policies are not a guarantee of return.
5. You should keep your investing and insurance separate.
There are many other places to invest your money which will not cost you the high commission prices of whole life policies. You are better off focusing on a term policy and exploring completely separate ways of investing other income.
6. Make sure that you purchase enough coverage to suit your needs in the future.
Because low rates make life insurance very affordable, this is not the time to skimp on coverage. Assess how much you will need and don’t short change yourself.
7. Consider what the term of the policy should be.
Your policy should be sure to cover your dependents when they need it most- before they are on their own. Also consider when your retirement will be kicking in before you determine your term.
8. Buy when you are healthy.
An older person or one not in the best health will pay much higher rates than someone younger. Buy your policy as early as you can, but it is not necessary to buy until after you have dependents.
9. Be honest.
Lying on your application to try to get a lower rate is not a good idea. If a large claim is made, the insurance company will surely investigate the facts before paying. Better to be up front than to leave surprises to be discovered when it is too late.
10. The Internet is your friend.
Buying life insurance online couldn’t be easier or faster. You can shop at any time while reviewing dozens of quotes and polices all while avoiding dealing with the pressure of pushy salespeople.
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