Options in life insurance policies can be frightening, and it is difficult to understand at first glance. It is difficult to know where to start from.
You should start with a misleading question: Do you need life insurance? Your detailed answer to that question can help you decide which type of life insurance you want to buy, assuming you need it.
If you decide that you need life insurance, then your next step is to learn about different types of life insurance and to ensure that you are buying the right type of policy.
The purpose of life insurance and causes you may need it
Depending on your personal situation, the need for life insurance can be different – those people who rely on you. If you do not have any dependents, you do not need life insurance. If you do not generate a significant percentage of your family’s income, then you may need life insurance or not.
If your salary is important for supporting your family, paying a mortgage or other recurring bills or sending your children to college, then you should consider life insurance to ensure that these financial obligations are in the event of your death. Are covered.
How much coverage do you need
Applying a rule of thumb is difficult because the amount of life insurance required for you depends on factors like other sources of income such as how much dependent you have, your loan and your lifestyle. However, a general guideline that you may find useful is to obtain a policy that is between five and 10 times your annual salary in the event of your death. Beyond that direction, you want to consult a financial planning professional to determine how much coverage you can get.
Types of life policies
Many different types of life insurance policies are available, including whole life, word life, changing life and universal life.
Whole life provides both death benefit and cash value but is more expensive than other types of life insurance. In traditional whole life insurance policies, your premium remains until you pay the policy. As long as you do not pay all the premiums, this policy applies to your death.
This type of life insurance can be expensive because huge commissions (thousands of dollars in the first year) and fees limit the cash value in the early years. Since these charges have been made in complex investment formulas, most people do not realize how much of their money is going in their insurance agent’s pocket.
Variable life policies are a form of permanent life insurance, create a cash reserve that you can invest in any of the options offered by the insurance company. The value of your cash reserve depends on how well they are investing.
You can distinguish the amount of your premium with universal life insurance policies, another form of permanent life insurance, by using part of your accumulated earnings to cover part of the premium cost. You can also vary the amount of death benefit. For this flexibility, you will pay higher administrative fees.
Some experts recommend that if you are under 40 and there is no family dispute for life-threatening illness, then you should choose Term Insurance, which provides death benefit but not cash value.
Life insurance cost
The least expensive life insurance is likely to be from your employer’s group life insurance plan, assuming that your employer provides one. These policies are usually term policies, which means that unless you work for that employer you are covered. Some policies can be changed at the end.
The cost of other types of life insurance is very different, depending on how much you buy, the type of policy you choose, the underwriter’s practice, and how much commission the company gives to your agent. The underlying cost is based on the functional table that projects your life expectancy. High-risk individuals, such as those who smoke, are overweight, or have a dangerous business or hobbies (for example, flying), will pay more.
Life insurance policies often have hidden costs, such as fees and large commissions, which you can not know about till you buy the policy. There are many different types of life insurance, and so many companies offering these policies that you should use a charge-only insurance consultant, who will research the various policies available to you for a fixed fee And will recommend that best. According to your needs. To ensure fairness, your adviser should not be affiliated with a particular insurance company and should not receive commission from any policy.
A healthy 30-year-old person could expect to pay approximately $ 300 per year for life insurance of $ 300,000. Under the cash pricing policy, it will cost more than $ 3,000 to get the same amount of coverage.
When choosing life insurance, use the resources of the Internet to educate yourself about the basics of life insurance, after a broker you trust, after which the rates evaluated by the insurance adviser are evaluated only is.
Internationally known financial consultant Suz Oran believes that if you want insurance, buy term; If you want an investment, then buy investment, not insurance. Do not mix both. Unless you are a very sensible investor and understand all the implications of different types of life insurance policies, then you are likely to buy life insurance.