None of us want to think about it, but we have to: we are mortal, and someday, we’re going to pass on. It is prudent to start planning now for that inevitable time in the future. If you have a family, then you have people who have to take care of your financial obligations after you’re gone. Why saddle them with this responsibility? By taking the time now to buy the right life insurance, you can make sure that your loved ones are taken care of in the event of your passing.
But how do you know what the “right” life insurance is? By asking the right questions, you can be sure to get the information you need to make an informed decision. Here are five key questions to ask before buying life insurance.
Without a doubt, this should be the first question you tackle. The answer to this question will go a long way in determining what type of insurance you’re going to buy and how much. If you’re looking for a policy that’s only going to cover you while you have dependents living at home, then you might be looking for a different type of policy than one that will last the rest of your life.
If you don’t have much in the way of financial obligations, then it’s not as necessary to get a large policy as it is for someone who owns a lot of assets or carries a lot of debt. In other words, knowing what you’re potentially asking for from your life insurance policy will determine what sort of policy you should be looking for in the first place.
Once you’ve determined what you need the policy for, you can start looking at your various options. While there are many, many different policies out there, they boil down into a handful of options. The first option is determined by what policies are accessible to you.
Most employers today offer some type of group insurance policy. This is a policy that you purchase as part of a larger group. Because of this, you get a group discount — a decent amount of coverage compared to what you would get if you were buying the policy on your own. As a tradeoff, however, you give up certain privileges, such as flexibility (most group policies can only be changed at certain times) or portability (you can’t take it with you if you leave the company). Still, it’s fast and convenient, and in most cases, a physical exam isn’t necessary.
On the other hand, you might want to consider an individual policy. While this can often be more expensive, and often a medical exam is required, you do get more in the way of control over your policy and what you want it to cover.
Another choice is whether you want a term or permanent policy. A term policy is an insurance that you pay on for a period — 10, 20, 30 years, etc. At the end of that time, the policy ends, and you either have to purchase a new one or make your way without life insurance for a while. On the other hand, a permanent policy is just that — permanent, and meant to last until you pass away.
As odd as it may sound, this is an important question. If you have a term policy, there’s a good chance you will still be alive when that term expires. Many people don’t know this, but your typical term policy doesn’t give you anything in the way of benefits after it expires.
As term policies approach the end of their span, however, you will most likely be given several options, including renewing the policy, lessening coverage to reflect your changing financial needs or upgrading to a permanent one.
Down the road, your needs may change. You need to know how those changing needs might be reflected in your policy. Can you change it as you go, and how easy or hard would that be? And what happens if you, unfortunately, find yourself in a situation where making a payment or two is hard? Will the insurance company be understanding? Or will that result in an immediate termination of your policy?
Many permanent policies allow you to build up cash value based on what you put into it. This cash value can be used later on if you find yourself financially strapped.
Another key question concerns your health. As you age, and your lifestyle changes, your health will change as well. Will this change affect your premiums? With a group policy, probably not. With an individual policy, regular medical exams might be required that can result in a change to your premiums. This is not the case for all policies, however, which is why it’s important to know what you’re dealing with before you buy.
Work with a dedicated insurance professional to help you find the right policy based on your needs, age, and financial situation.
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Category: Life Insurance