How to Make Sure Your Life Insurance Policy Takes Care of You
Tuesday, April 18, 2017, 6:00 AM | Leave Comment
Life Insurance: it’s one of those things no one wants to talk about, but everyone needs to have.
You need insurance for your home and health to protect against accidents, give you coverage in times of need and to stay secure when your financial situation might become vulnerable.
While regular insurance can cover car repairs, medical bills, and home repairs, life insurance is made so that if you or a loved one dies, your family will still be provided for and left money to live on.
In this article, we are going to look at what you can do to make sure your life insurance policy is prepared to take care of you and your family. Knowing the best kinds of policies and options can give you an edge when deciding how to save and spend this money.
Let’s have this talk once so you never have to think about it again.
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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) you can later use as collateral for loans, to pay your monthly insurance premiums, or can be drawn out as cash.
However, the amount of money you pay to have this “inner-policy” cash value is highly expensive in terms of the fee (i.e. monthly premium) that you pay to own it.
In fact, the monthly premiums are almost always so much higher than for a similar term policy that you are actually 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 on the whole should be avoided if you make a regular paycheck.
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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 at the end of the term without providing evidence of insurability (EoI) again.
This can be incredibly useful, because you will probably have health problems later in life, and if these health problems showed up on an EoI doctor’s report, then your rates for a future term insurance policy would be MUCH higher.
Be sure to ask about what might be or might not be covered in these kinds of policies as you go through your options.
Just knowing how you renew can make life easier for your family if they do end up claiming this insurance money.
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Cover 10X Your Current Income
No one likes to buy insurance, but it is meant to protect your income for your family in the event you die.
Because of this, you should purchase a policy with a face value that is at least ten times your current income level.
According to the Law Office of Nancy L. Cavey you should make sure you are financially prepared before making any decision like this.
Thoroughly review your finance 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 should be decent enough to get you an amount that will serve your family in an emergency. A financial planner can help with this step as well.
If used wisely, your surviving spouse (or children) could invest this money and make it last almost indefinitely while still pulling a nice income as they search for jobs.
If you invest in less than ten times your current income, it will be difficult to make the money stretch out over a number of years even if the investments do very well.
Be sure you 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.
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