Life Insurance

Six Things to Look for in Life Insurance Policies

buying a life insurance policy

As an adult with a house, a spouse, kids, or any financial liabilities, and you should consider buying a life insurance policy. With life insurance in place, you do not have to lose sleep worrying about the financial burden your loved ones would inherit if you were to die unexpectedly. We all are a big fan of term life insurance since it is affordable to purchase and fairly easy to qualify for if you’re in good health, in terms of how much life insurance coverage you should buy, many life insurance agents suggest you purchase five to 10 times your income in coverage of $250,000 to $500,000 for every $50,000 you earn. However, you may need even more coverage if you have a lot of liabilities, or kids, or expenses coming up in the next ten to thirty years.

Your insurance policy’s length mostly depends on your personal circumstances, if you are fairly young and want income replacement for your entire career, then a 30-year term policy could be ideal. If you are older, or you have a few debts and tons of savings, on the other hand, a shorter-term life insurance policy might be better.

What should you look for in a policy?

Affordability

This is obviously a huge disparity, and one consumer should know about when weighing the pros and cons of buying whole life or term life. While whole life insurance provides a death benefit your whole life (until you die), it is a stretch to say the benefit of perpetual life insurance is always worth the added expense. When you buy a policy that is affordable, you will be much more likely to be able to hold onto it if you have to make any serious cuts to your budget.

Immediate Payout

If you see a commercial on TV offering you quick and easy coverage with no medical exam, it is probably from a company that offers what is called “simplified issue” life insurance. Because there are few questions on the application and no exam, it is true that you can easily qualify for these types of policies.

However, there is often a two- or three-year waiting period after purchase before they will payout 100% of the proceeds upon death if you want life insurance coverage that starts right away, this is obviously imperfect.

Underwriting Leniency

You will make a huge financial mistake if you buy a policy from a company that does not treat your particular health or personal activities fairly, says Huntley. Range of companies widely on how they price out risks like diabetes, smoking, travel outside the U.S., or your family’s medical history. Always be sure to speak to a knowledgeable independent agent who can ‘shop’ various companies to find the best rates for your particular situation. If you do not, you risk overpaying for a life insurance policy – or not being accepted altogether.

Automatic Payments

When there are certain bills you may want to pay manually, life insurance is one of those recurring expenses that is usually best set up as an automatic bank draft or charge of credit card – especially in the case of term life insurance where your premium stays the same. The reason for this is simple, if you forget about your life insurance bill and do not make your payment on time or within your grace period, which is usually thirty days, your policy may be canceled altogether. At that point, your issuer may not allow you to pay back your missed premiums, and they are not required to reinstate your policy, either.

Conversion Feature

If you are looking into term life insurance, beware of policies that do not allow you to “convert” your term policy into a permanent one, this feature typically allows you for exchanging your term policy for a permanent plan such as universal life or whole life without proving you’re still healthy. For example, if you buy a 20-year term life insurance policy, and decide after 19 years that you still need coverage but have developed some medical conditions since your initial term purchase, the conversion feature would allow you to keep your coverage, whereas you may not be able to qualify if you were to go back out to the market for a new policy and most term policies include a conversion feature, but not all, so be sure to find out.

 Living Benefits

There are many newer policies that give you the option to receive payments if you get a chronic illness or need to be placed in a care facility and several companies may give you 20- or 25-year windows at which you can get back some or all of your premium paid into the policy if you no longer want or need the coverage, if you want the option to get cash out of your life insurance policy if you get cancer or need end-of-life care, then looking for a company that offers this option is a smart move.

However, you may need even more coverage if you have a lot of liabilities, or kids, or expenses coming up in the next ten to thirty years. Your insurance policy’s length mostly depends on your personal circumstances, if you are fairly young and want income replacement for your entire career, then a 30-year term policy could be ideal. If you are older, or you have a few debts and tons of savings, on the other hand, a shorter-term life insurance policy might be better. When you buy a policy that is affordable, you will be much more likely to be able to hold onto it if you have to make any serious cuts to your budget. Always be sure to speak to a knowledgeable independent agent who can ‘shop’ various companies to find the best rates for your particular situation. When you buy a policy that is affordable, you will be much more likely to be able to hold onto it if you have to make any serious cuts to your budget.

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