You have probably asked yourself if you should purchase life insurance; and you have probably wondered if you need life insurance or can afford it. In this article, there is basic information about term and whole life insurance. Hopefully, this will help you with your decision.
About Life Insurance
Life Insurance is not just for burial costs. Life Insurance is intended to make things financially easier for your loved ones left behind. Your loved ones can use the life insurance money to cover funeral costs, mortgage costs, rent, medical expenses, college tuition and any other expenses they may have.
In addition, life insurance proceeds can help replace the income no longer generated by the deceased.
Do you need Life Insurance?
If you answer “no” to any of the following questions, you may need life insurance.
– When I Pass Away, will my family or spouse be able to afford burial costs?
– When I Pass Away, will my family or spouse be able to afford the mortgage or rent, the cost of raising the kids, medical bills, car payments and other expenses?
– When I Pass Away, will the life insurance provided by my employer be enough?
Term Life Insurance
Most people buy Term Life Insurance because they want to make certain they have life insurance protection during the years they are paying on a mortgage or during the years they are raising children. They plan to keep the policy during that time only.
Term Life Insurance means that during a pre-determined number of years, your rate and coverage will not change. If you have a 10-year term policy, your cost and coverage will stay the same for 10 years. If you have a 15-year term policy, your cost and coverage will stay the same for 15 years. If you have a 30-year term policy, your cost and coverage will stay the same for 30 years. Confirm with your Agent the length of time your premium payments will be fixed/remain the same.
You cannot borrow from a term life insurance policy.
When you buy a term life insurance policy, you may want to ask your Agent if you can convert the policy to a whole life policy and reduce the coverage, if needed, when the term ends. This is a popular feature.
Never cancel your existing life insurance policy until you know your new life insurance policy has taken effect.
A free exam is sometimes required to qualify for a term life insurance policy. The insurance company will most likely send someone to your home or office to conduct the exam.
If there is no exam involved to purchase the policy, the policy may be more expensive than a policy that requires an exam.
Whole Life Insurance
People who buy Whole Life Insurance/Final Expense policies are usually looking for just a small amount of coverage for burial expenses.
These types of policies usually build a cash value that can borrowed from. However, borrowing from the policy can reduce the value of the death benefit. That means the beneficiary could receive less money.
If you are considering switching to a new policy, NEVER cancel an existing insurance policy until you know that you have been approved for a new policy and that the new policy is in effect.
The word “Premium” means your cost or payment for the insurance policy. The premium must be paid to keep your coverage in place. The premium mode is pre-determined by you to be paid monthly, quarterly or annually. If you need to change the payment mode, contact the insurance company.
Before you apply for life insurance, you can get an idea of what your premium will be by getting a life insurance quote from an Agent. Keep in mind that the life insurance quotes given are just estimates. The true price is determined when your application goes through underwriting.
The Beneficiary is the one who receives the insurance money when a death occurs. You can have more than one beneficiary named in your policy; and you can specify the dollar amount or percentage each beneficiary will receive. If changes are needed, contact your Agent.
Free Look Period
You usually have a “30-day free look period” to determine if you are comfortable with what you see in the policy. Check with your Agent. The free look period may vary depending on the State you live in.
When you receive your policy, read it right away. If there are things you do not understand, contact your Agent. It is okay to ask questions and do research.
To check an insurance company’s rating, etc., visit the Department of Insurance website for your State. For example, if you live in California, you can search online for “Department of Insurance California”.
Ask Questions About The Insurance
Make certain you know how your policy works. Here are some questions you may want to ask:
-Am I covered during the first 2 years of the policy?
-Will my premium/rates go up?
-Can my policy be terminated?
-What happens if I need to cancel my policy?
-What is the grace period for my premium payments?
-Are there any exclusions?
-Can I convert my term policy to a whole life?
Ask your Insurance Agent any question that comes to mind.
IMPORTANT: This article was written to provide you with some basic information about life insurance. Talk to your Life Insurance Agent to get more information and clarity about the policy you are purchasing.