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What Is Life Insurance And Why Buy It?
Article 2 of 12 in What to Know Before You Buy Life Insurance
Although we do not like to think about it, it is inevitable that we will not live forever. Purchasing a life insurance plan could mean the difference in whether or not your loved ones are financially cared for after your passing. It is easy to get yourself a policy as the application process can be done by shopping on line, or by contacting a reputable agent in your area. When you are considering life insurance, consider those who depend on you for financial support and be sure to get a policy that covers their continuing needs.
TIP: If is very important that you get a policy that fits your family's needs and budget. If you have any questions, it is better to seek outside help. Ask an agent for assistance, and get the help you need.
Life Insurance Basics
Life insurance provides the peace of mind that your family's finances are in place, and can provide other benefits by acting as a savings or investment account. What type of life insurance plan you purchase for yourself and your family will depend on the goals you would like to accomplish and your age. There are two basic types of life insurance:
- Term Life Insurance is for a specific term or period. You might purchase this type of life insurance plan to cover a specific time period in your life. A 30 year term would cover you for 30 years. After that time, the insurance goes away. However, this time period may cover the greatest need years - when the children are in college or during the time period of a mortgage. Term insurance can come in many different increments. You can purchase 5, 10, 20, 30 term life plans, and can add multiple policies to provide extra coverage in times of need. Term life insurance rates are lower because the policy focuses solely on the death benefit and not on any savings or investment. Because it is affordable and provides excellent coverage, term life is a great fit for most people.
- Permanent Life Insurance is for the rest of your life. For this reason, it is a little more expensive. However, it can offer some the best coverage. As long as you pay the premium, you will have insurance, and build savings with an accrued cash value account that can earn dividends. It can be borrowed against in a time of need or be directed to purchase additional insurance. There are several types of permanent life insurance that can fit your insurance, savings, and investment needs which means it could be a good choice if you can afford to purchase it.
Take the time to get quotes that allow you to compare term vs permanent life insurance and find the right policy for you. The best life insurance plans may be a hybrid of both of the types above giving you the maximum coverage during the years you need it most. If you are unsure, get advice from an insurance agent before you make a decision.
Understand Life Insurance Pricing
When you apply for life insurance, you may be required to take a medical exam to test for any health risks. You will likely also be required to sign a medical release form in order'for an'insurance underwriter to review your medical history. The goal of the application process and the medical exams are to determine whether or not you are considered a high insurance risk. Life insurance companies will use their underwriting criteria to project how likely you are to die either before your term expires or you pay a significant portion of your premium payments. While this thought is unpleasant, keep in mind that life insurance is a business and the companies make money by collecting premiums and not paying out claims. As such, it is important for them to set the price of life insurance at a point that fairly reflects how healthy you are and how likely you are to pay on your policy for a long time. Once all the appropriate underwriting requirements are met, the insurance company will issue your life policy.
TIP: In order to find the best life insurance price, you need to shop and compare quotes before you make your decision. DO NOT, however, fill out multiple applications because doing so raises red flags that can cause your premiums to go up.
Buying life insurance is important for those that you leave behind. It can also give you the peace of mind that life will continue even though you have passed on. Many life insurance plans are very affordable with easy payment options. Depending on your age and health, you can purchase life insurance for a little as $20 a month. To get a life insurance quote and'find out what life insurance plans are best for you and your goals, click here to fill out a free quote and have an insurance agent contact you!
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