I am sure many of us can remember at least one film where the plot was all about money from life insurance and its beneficiaries. However, life off screen is completely different and, as farfetched as it may seem now, life insurance policy really can save your loved ones in the most difficult time. While we all know that ‘life insurance is a monetary benefit paid to an individual’s beneficiary at the time of his or her death’, depending on the type of policy the person chooses, payouts aim to achieve one or more of the following objectives:
Cover the bills and other financial expenses of an individual.
Provide for dependent family members of the deceased and probably finance the education of children of the deceased or sometimes even grandchildren.
Here are some useful tips that can help you in making the right choice as far as the life insurance policy is concerned.
1.Consider the amount of insurance you need and your budget
You must first focus on how much insurance your dependents would really need might you depart. There are various online financial calculators to help you do that. Then you should calculate your actual budget and realistically come up with a figure that you can put into policy annually.
Answering these two questions will usually make you understand what type of policy you need. Term insurance will be the only type of insurance that is affordable – if you have a bigger budget, then you can consider permanent insurance.
2.Don’t be intimidated by all the options
If you are doubtful of what to do, just buy a bunch of term insurance with a guaranteed conversion option. This way, you can buy yourself time to consider and evaluate the type of insurance to buy. By purchasing a term, you’ll be locking in your current health rating, which is probably now the best because we are all basically less healthy as we age.
3.Always do a trial application
When you understand your budget and the amount of insurance you need, you can apply for an insurance on trial basis.
You can apply for insurance at no cost to obtain an approximate health rating. This process takes about 30-60 days, so while the application is pending, you can still think about the amount of insurance you need, and even the type of insurance you need. When you are approved and know the exact price, you can change the amount of insurance up or down, or change the term from 10 years to 20 years or even convert term insurance to permanent and vice versa.
4.Avoid adding too many riders
There is another part of the life insurance application that deals with “riders”. Riders are add-ons to your coverage. There can be a “waiver of premium” or disability rider, child riders (for your kids), return of premium riders, and sometimes a long-term care rider. Generally, I do not like to add on riders. These are usually just gimmicks for the insurance companies who are eager to make more commissions.
Focus on getting the right amount of life insurance first, then you can worry about adding the riders if you still have money in your budget.
5. Always work with a good agent
Here are some of the qualities you should look for in an agent
They must be independent and must be able to do business with many different companies on a consistent basis.
They must be able to introduce you to all the options. They are there to provide guidance and not force you into taking one plan.
They must have a great understanding of the company that best suits your health situation. This means that they should have a lot of experience in selling policies.
They must help you decide whether to buy term or cash policy without any bias for themselves.
They should have testimonials from happy clients and credentials to prove that they have sufficient knowledge in their field. There are a lot of beginners in this business. Avoid working with them, if possible. Let the others make mistakes.
Life insurance is an important component of a healthy financial plan. In order to get the right policy, you need to consider many things.