Important Facts on Life Insurance
Whether to get a life insurance or not is a tough decision to begin with, but if you want to choose the right policy it might give you an even bigger headache. Once you decide you want the kind of security that comes along with life insurance, you’ve just made the first step. Every insurance company has their set of policies besides the regular ones and so many riders that will make your head spin, especially once they start bombing you with legal terms and different rates.
Many insurance agents won’t prove helpful at all, especially if they’re getting paid on commission. We’re not saying that most agents will try to rip you off or scam you, but be aware that they’re most likely offer you something you don’t need, just to get you to get a more expensive life insurance plan.
One of the first things to take into account is the amount of protection you need. Two main factors are the number of debts and the number of persons that are financially dependent on you. You get the logic – the more debts and dependents there are, more insurance you need. They say that the general rule of thumb is to multiply your yearly salary by 5 to 7, but that’s just a rough estimate. No one knows your needs better than you, so take some time to think it through.
The next big question is whether to go for term life or whole life insurance. While term might sound like a good idea for younger people who can’t assume their future needs, if you already have a stable job and a family and can predict your future expenses like your kids’ education, it would be a better plan to go with whole life insurance.
If you’re a senior, you have to know that many insurance companies refuse to give you term life insurance if you’re over a certain age, or you might end up paying sky high premiums that don’t pay off. Some advocate going for whole life insurance because of the investment component it includes, but you shouldn’t think of your insurance as of an investment. Things might change greatly over the years and you can’t rely on your life insurance money.
Why not benefit from internet and save money? It takes some extra time to check out online offers, but it might save you up to a couple hundred dollars. There are even some websites that offer to do the comparison for you, and that’s definitely worth checking out. Another helpful tool is software that calculates the estimated level of coverage you need based on a set of questions about your financial situation.
These life insurance calculators can really come in handy when trying to make a rough estimate. While most people are just too lazy or busy to go browse different offers and just go for the first that sounds okay, do yourself a big favor and shop around. You’ll be surprised to learn that there are big differences in rates and health requirements, and it pays off to do some research first.
Three vital steps when choosing a good life insurance
We could probably name a dozen or more steps you need to get through in order to get a good life insurance, but these three certainly take precedence over all the others and deserve the most of your attention. This article will go through each of them and explain why is it so important. You have to carefully observe all of these steps in order to make sure that you will be able to deliver when it is time to make use of these services and that it doesn’t put your monthly incomes in jeopardy.
1. Collective plans
This is the first step to choosing a good life insurance. It works like when you get a group ticket to a show. You all end up paying less than you would pay for individual tickets. A lot of companies offer life insurance packages to their employees, which are a lot less expensive than if they were to purchase it individually. Of course, the problem is that they are often (if not always) much less specialized than the individual life insurances. In other words, it is the company that will often determine a lot of the facts about the life insurance you are getting.
2. What is the quality of the network?
There are two main questions that must be answered before you get insured. The first one concerns the distribution network and what is it and the second one is about the size of the network that is covered by this insurance.
3. Know what the bureaucracy needs
There aren’t a lot of people in the world who like bureaucracy. In fact, nobody I know and has had an encounter with a bureaucrat had a lot to say nice about him or her. That is why you have to prepare in advance everything you need to avoid them returning you because of some form. You need to to be well acquainted about what paperwork you will need in order to get a good life insurance. Of course, this includes the paperwork you will need both before and “after”.
In the end, it is you who ultimately create the “rules” for your life insurance. A strong, healthy man is a lot more likely to get a cheaper life insurance (well, no one said that life insurance companies are crazy) than someone in advanced years with a history of health problems. Also, your health is not the only thing that can determine your life insurance. How dangerous your job is will also play an important role in this. Namely, a waiter would pay considerably less than someone who works as a fireman, to make things more understandable.
Like I said at the beginning, these are just three steps to getting a better life insurance and there are probably dozens more, but if you carefully observe these three, you will find it much easier to purchase a good life insurance that will provide for your family when are gone.
What kind of life insurance should I buy?
At some point, most people will find that their priorities are at some point in their lives where they are increasingly focused on nourishing their families and creating as much financial security as possible.. A life insurance policy can be an essential part of this financial safety net, but people often find themselves not knowing the differences between the major types of life insurance policies. Add the fact that a vast majority of us has some sort of a financial obligation in form of large debts (often mortgages), and it becomes even essential to choose wisely when buying life insurance.
For most of us, the number one reason to buy a life insurance policy is to provide some level of protection for our families. In case something happens to us, it’s important to know that there’s enough money for our loved ones to live on, even if we won’t be able to provide for them. However, this is not the only thing a life insurance policy is good for. There are different types of life insurance policies, and they can be used for various forms of protection.
The most basic, “vanilla” type of life insurance is called term life insurance. A term life insurance policy enables the holder to choose both the period of time that the policy will cover, as well as the amount of money that will be payed out in case the worst happens. In case the policy holder dies during the term, the issuer of life insurance will pay out the pre-determined amount of money to the beneficiaries of the life policy. In case the policy holder outlives the term, nothing happens. The policy runs out, and the premiums that have been payed out during the term are not returned to the policy holder.
Furthermore, a life insurance policy can be either a level-term policy or a decreasing-term life insurance policy. A level-term policy pays out a predetermined sum of money if the holder dies during the coverage period. The predetermined amount remains the same during the coverage period, and so do the monthly (or annual) premiums. This is a good option in case your main goal is to provide protection for your family. Another potential use for level-term life insurance policies is to provide financial cover for a certain period of time – for instance, to cover a mortgage that’s not under an endowment policy.
On the other hand, with a decreasing-term life insurance policy, the amount the policy holder is covered under decreases with time. This type of life insurance is often used to cover debts that are reduced with time – most commonly repayment mortgages. Lower premiums (when compared with level-term life insurance) make decreasing-term policies an attractive option – as well as useful when it comes to inheritance tax planning. A variation of this type of life insurance is a family income benefit policy. It’s main characteristic is that, instead of a lump sum, it pays out a regular, monthly sum to the beneficiaries until the expiry date.
Several misconceptions about life insurance
Everyone has an opinion or even a set of opinions on life insurance. You have people who will tell you that it is a complete waste of time and you have people who say that everyone needs the most comprehensive life insurance available, no matter the cost. As always, the truth is somewhere in between and one of the reasons why many people do not realize this is that they have some preconceived notions about life insurance and because they believe certain misconceptions about this type of insurance. We will be talking about some of these misconceptions in this article, in the hope that you will realize this and see them for what they are.
The first misconception and the one that most people hold is that they do not need life insurance. This is especially true for young people who cannot fathom that they are mortal and that they are just as likely to be involved in an accident as anyone else. It is one of those protective mechanisms that we humans have and that prevent us from becoming shut-ins that do not want to do anything that could be in the least dangerous. However, this leads to a number of young people not having life insurance and in a number of partners and families being left without any income due to the lack of life insurance.
Another misconception and the one that is very closely tied to the previous one is that everyone needs life insurance. You will often hear from insurers and people who advertise life insurance that absolutely everyone needs life insurance. They say that even if you do not have a family that you can leave behind, that you have funeral costs and other types of expenses that you can cover with life insurance. Well, the truth is that some people have enough money saved not to worry about this. For example, imagine a man in his 60s without a family and without anyone depending on his money. He has taken care of all his debts and mortgages and he has $70,000 saved. He has no need for life insurance and he would only be wasting his money.
Another misconception is that the life insurance that your company or your employer provides you is enough. This would be true if you were guaranteed that you would stay at the same job for the rest of your life. In fact, most people change their jobs and when you do so; your life insurance is usually not transferred to your new employment. In addition to this, when you lose that life insurance, since you are older, you will most likely need to pay more for your own policy than you would have if you took out life insurance in the first place.
These are just some of the many misconceptions about life insurance and we are sure that you yourself can come up with a few. The important thing is not to let these misconceptions affect your decisions when it comes to your decisions on life insurance.
What are some of the life insurance myths?
Life insurance is a taboo subject for some people. They don’t think that it is safe and that it is necessary, which is fine since everyone is entitled to their own opinion but in this article we are going to mention some of the most common myths that have been surrounding life insurance companies, policies, people who are taking out the policies, etc. You are going to notice that some of the myths are completely untrue and irrelevant but it might help you make a decision in the end.
It is interesting that some people think that those who are not in a relationship or married shouldn’t take out a life insurance policy. There is no particular reason for this to be true. Single people have families as well and that is why they need life insurance like everyone else. Let’s put it this way – if something bad happens to them, they can leave the money to their parents, for example, or uncles, sisters, brothers, etc. If you are a working man, you might think that your company and your boss have taken care of everything in terms of a life insurance policy, but that might not be true. That is why you need to make sure that you learn all there is to learn about this matter in order to make a decision whether or not to take out a policy.
I am going to save rather than paying for my life insurance… This is what some of the people are going to say as well, but you have to realize that saving and a life insurance policy are two completely different things and it is hard to connect them in any way. Some of the life insurance companies are offering policies with a profit which means that after 10-20 years, not only that you are going to get your money back but at the same time you are going to make some additional money as well.
One of the common myths is that a life insurance policy is too expensive even though many people are not even sure how expensive it actually is. The thing is that you can choose the amount of money that you want to pay every month or once a year, for example and for that money you are going t get more than you have expected. College students might think that they don’t need life insurance, but why? Everyone needs it, if you are clever and want to think about the future.
No one knows what’s going to happen tomorrow. Is it true that the premiums for those who are not smoking are the same like for those who are? This is something that many companies are considering and if you are not smoking, chances are that you are going to get a much better deal and that your money is going to have an even bigger value in terms of life insurance.
How are the life insurance premiums calculated?
We are quite positive that there will be those among you who will say that writing an article on how the life insurance premiums are calculated is totally pointless. Some of you will say that this is something that no one will be interested in and you will be wrong. Why wouldn’t you like to know what it is that determines the height of your life insurance premiums? Isn’t it better to have all the information? Other people will say how there is absolutely no way in which we could even begin explaining how these calculations work and while they will to an extent be in the right, we believe that we could at least point out a few things that determine the premiums and we also believe that this might actually help people lower their premiums, which is definitely a good idea.
As we said, there is simply no way in which we could explain entirely how life insurance premiums are calculated. This is an extremely complex math and people spend years training for it. There are also numerous algorithms and functions involved, none of which would make sense to a regular person. However, we can give you a few hints into what exactly it is that these calculations involve. Who knows, maybe you will find out that there are things you can change and make your premiums more affordable.
For one, there are those things that you simply cannot change. For instance, your age and your medical history. You are as old as you are and unless you manage to travel back in time, there is not much that you can do here. Also, your medical history is a done deal and you cannot change it in any way. Also, do not try to hide anything, they will find out and you might actually end up paying even more as they might start questioning your other answers.
When you apply for life insurance, they will also be checking your health extensively. This is all in order to discover whether you are suffering from anything that is considered high-risk with the insurers. They will check your blood, your vitals and everything else that you can think of. They might even want you to undergo certain tests of physical condition. This is where you can cut down on your premiums if you workout for a while and get yourself in shape.
Your lifestyle will also play a huge role. They will discover any traces of nicotine, caffeine, alcohol and other substances in your blood and other tissue, so do not even try to hide things. What we could advise is that you steer clear of all of these substances for longer periods of time before going for tests. This way, you might actually hide the fact that you are a smoker. It is unlikely, but it does not hurt to try.
Finally, your hobbies, your profession, even your marital status, all of these play into determining your premiums and you need to be aware of at least some of them.
