What you should know about life insurance before and after you buy
BEFORE YOU BUY
1. Know Why You Need Life Insurance
While most people may need life insurance at some point in their life, don’t buy a policy just because you heard it was a good idea.
Life insurance is designed to provide families with financial security in the event of the death of a spouse or parent. Life insurance protection can help pay for mortgages, a college education, help to fund retirement, provide charitable bequests, and, of course, is a key element in estate planning. In short, if others depend on your income for support, you should strongly consider life insurance.
Even if you don’t have any of these needs immediately, you still may want to consider purchasing a small “starter” policy, if you anticipate you will have them in the future. The reason: the younger you are the less expensive life insurance will be.
2. Understand the Type of Policy You Need
There are two basic types of life insurance policies: term life and whole life. Term life insurance policies last for a specified period of time. Term life is less expensive than whole life because it usually expires before the benefits are used.
Whole life insurance lasts from the day you buy the policy until the day you die. A whole life policy is more expensive because the coverage could last a few years or several decades. Whole life policies can be borrowed against at a high interest rate, while term life policies usually only offer a death benefit.
However, many carriers are offering a new kind of term policy with living benefits as well as a death benefit. These policies can pay out for critical illness such as cancer or stroke as well as chronic illness if you can’t perform 2-3 ADL’s. These kind of term policies are only slightly more expensive than a regular term and offer much more for your money.
You can use our Policy Decider tool to help determine what kind of life insurance is best for you.
3. Know How Much Coverage You Need
The amount of money your family or heirs will receive after your death is called a death benefit. To determine the proper amount of life insurance an online calculator, like the one available at this site, can be helpful. You can also get a ballpark figure using any number of formulas but the best way is to speak to a professional and run through a full needs analysis.
4. Speak With an Independent Broker
These brokers will have access to many more products than just one firm can provide. An independent broker will be able to offer much more to you and your family than just one company’s product.
You want to make sure you to choose a company you can rely on to be around for as long as you’ll need your coverage, and which invests your premium in a highly prudent manner in order to pay the claims of its policyholders.
AFTER YOU BUY
1. Know About the Free Look Period
The free look period is where a new insurance policy owner is able to terminate the contract without penalties such as surrender charges. A free look period often lasts for 10 or more days (depending on the insurer), allowing you to decide whether or not to keep it; if you are not satisfied, you can receive a full refund for it.
2. Make Sure To Review Your Coverage Regularly
As time goes on, your situation can change drastically. As such, it’s important to review your policy annually to determine if you need to make a change (more coverage, less coverage, the right kind of policy, etc.) Your agent should contact you every year to conduct this review, if they are not, you may want to contact another agent and get a second opinion.
If you have a permanent policy, it is very important to annually review your coverage. Depending on the type of policy and the company you’re with, many things can change including dividend payouts, internal rate of return and financial strength of the company. There are many variables to consider in a permanent policy so it’s even more important to speak with an expert when it’s time for an annual review.
DIGITAL COFFEE TALKS
Guest Speaker Tommy Rivers
Chief Financial Advisor, AXA
August 11, 2019 3pm-4pm
Register online free
Life Insurance Terms Explained
The process by which all information is gathered and a final decision is made as to weather or not coverage will be offered.
A life insurance company (i.e. AIG, MetLife, Prudential).
This is the money that’s available within your life insurance policy. You can take out most of this at any time and the full amount if you cancel the policy.
An optional benefit you can add to an insurance policy that provides additional benefits for additional cost.
The amount you pay for an insurance policy either monthly, quarterly or annually.
Refers to instances where a taxpayer can delay paying taxes on earnings such as interest, dividends or capital gains until they withdraw them.