What to Look for When Shopping Life Insurance Policies

Monday, May 20, 2019, 6:00 AM | Leave Comment

Life insurance is essential for anyone with family members who depend upon their income.

If something happens to you, life insurance provides for children, family members with disabilities, and other dependents.

Life insurance is an integral part of financial stability, potentially covering your funeral costs (which can cost tens of thousands of dollars), debt payoffs, and inheritance.

Additionally, it can come to your aid as an asset in your senior years.

What to Look for When Shopping Life Insurance Policies
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  • Why Do You Need Life Insurance?

    Think of life insurance as income replacement. If you die, a robust life insurance policy replaces that income. If you have young children, the life insurance policy may provide for their living expenses and place some of that income replacement in trust. If your spouse depends on your income, it sustains as much of their normalcy as possible after your death and provides the stability you’d like them to have.

    Even in times of advanced technology, accidents are still possible and forces unpredictable. For example, the mortality rate of delivering mothers has risen considerably in the United States in recent years, making childbirth a risky proposition. The United States has 26.4 maternal deaths per 100,000 births: well over double the rate of any other developed nation.

    Inheritance is more than money in the bank, depending on how you structure it with your insurer. It’s a college education, your child’s wedding or a down payment on a future family abode.

    If you’ve taken out a loan or mortgage, untimely death isn’t part of the plan. You know you’ll be able to pay your creditor based on your income. If you’re no longer here to do that, the burden could fall on your family. Life insurance can safeguard them from this responsibility. Life insurance may also cover your tax expenses.

  • How Much Life Insurance Do You Need?

    The amount of life insurance you need is a top consideration as you begin to evaluate life insurance policies. Your insurance should cover your burial expenses, your family’s immediate expenses, and the cost of supporting your loved ones until they are financially independent. When you speak with a life insurance broker or peruse policies online, be sure to highlight these needs.

    Generally, this means the policy covers five to 10 times your income. If you’re in a phase of life with many upcoming expenses, you may wish to consider investing beyond that amount to ensure stability for your family.

    For the insurance company, it’s a numbers game. While insurance is a sensible way to protect your family, it’s also an industry, and these companies profit by gambling on your general odds of survival.

Most life insurance companies offer one of two types of life insurance:

  1. Term life insurance: This insurance has a reasonable premium, and easy to obtain if you are in good health. Term life insurance companies can deem you unqualified if you do not pass a health assessment. If you’re able to qualify for term life insurance, this is typically the more reasonable option.

  2. Guaranteed issue life insurance: This insurance may be a better option (or the only option) if you’re in poor health. With guaranteed life insurance, the payouts are less and the premiums higher than term life insurance. With this type of insurance, you won’t have to answer questions about your health, but your state of residence, sex, and age still influence premiums. Again, the payout here is low and the premium high, but it’s better than nothing.

Other Features to Look For When Shopping Life Insurance Policies

These specific features should remain key considerations when you’re shopping for life insurance policies:

  • Automatic Payment Options

    You don’t want to miss a critical life insurance payment. Make sure you can set your billing option to automatic. Have it draft from your checking account or charge your credit card when it’s due. Most people opt for monthly payment options, but as with auto insurance, you may earn a discount by paying for a few months at a time.

  • Term to Permanent Conversion

    Since you need to be healthy to really benefit from term life insurance qualification and benefits, you can lose that coverage if you’re unable to convert it to permanent insurance, which can see you through the rest of your life. If your prospective insurance doesn’t include this feature, it’s only a matter of years or decades until it will be useless to you as an aging consumer.

  • Living Benefits

    What happens if you become diagnosed with chronic illnesses and cannot support your family? As times change and the costs of healthcare increase, more companies offer this benefit, which was previously rare or covered only other under insurance types. Government and other disability benefits are often meager, so living benefits can close that gap for you and your family.

  • Financial Accessibility

    You need life insurance payments that work for your lifestyle. Budgeting for life insurance takes some consideration, even though the benefits of having it are obvious. Make sure you read carefully when it comes to life insurance tiers and grades — there are crucial differences — and choose what you’re able to afford.

  • Time Until Payout

    Guaranteed life insurance often has another drawback: it doesn’t pay out right away. In the event of your untimely death, your family could have to wait years before getting a check. In the meantime, they grieve you — and bills accrue. Make sure they get what they need as soon as they need it.

  • Life Settlement Options

    As a senior, life settlement options enable you to sell your insurance benefit for cash on hand. This might be an option you can use if your children are well-off and self-sufficient, you have no dependents, or in the event of limited resources in advanced age.

Armed with this knowledge, we advise creating a handy checklist to keep track of your options and weigh the pros and cons of each policy.

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