Introduction:
Normally life insurance policies are meant to be paid to “named beneficiaries” when insurer dies. The beneficiaries may be one or more individuals or even an organization.
In most cases, policies are purchased by the person whose life is being insured. However, life insurance policies can be taken out by spouses or anyone who can prove that they have an interest in the person. If you purchase insurance on someone else’s life-for example, a spouse-then the policy pays when that person dies.
Which type of policy should I choose?
There are so many varieties of life insurance policies that you’ll want to choose one with characteristics suited to your individual needs. While several different kinds of life insurance coverages can be defined by their unique characteristics, they all fit into two classes of life insurance products: term and cash value policies.
Term life insurance is the policy one buys for a specified time period. This policy will pay out to the designated beneficiaries the face amount if the insured person dies during that specified time. Term life insurance is to provide less expensive coverage over some period of time, for example ten or twenty years.
Term life policies contain a renewal feature where it is possible to extend cover after the term lapses even if your health situation has changed. Again, these premiums may be charged at higher rates compared to the original policy. Advise you on how much you will pay before renewal while at the same time determine if you lose your option to renew at a certain age. If your policy is non-renewable, you will need to apply for coverage when the term ends. A cash value policy is different because you may keep it as long as you need it. Another difference is that these policies have savings or investment features, which make it possible for policy owners to receive money from the policy before they die. Whole, universal, and variable are the types of cash value policies.
Questions You Should Ask Yourself When Taking on a Life Insurance Policy?
How much of the total household income do I contribute?
Will these financial obligations change in the future?
Because you are aware that the more years that pass, the greater a person’s chances of dying are, for how many years do you anticipate that your family will be expecting death benefits?
What will I ask my agent?
Am I paying for this on a regular basis, for example, per month?
Does my policy have a cash value?
Does my policy value annually increase?
How much premium and or policy value, is non-guaranteed?
What are my minimum requirements on policy?
What may I want to think more about?
If you have any life insurance, be sure to compare your old and new policies. Further, any changes in health conditions may affect the ability to procure a new policy or to pay a premium under such a policy. Do not cancel an existing policy without receiving a new one.
Before you purchase a life insurance policy, ensure you can afford the premium. Most life insurance premiums are very sensitive to changes in investment earnings of the company, cost of claims, and other expenses. You should be sure to ask what the highest premium might be to keep your coverage.
Does your policy have a cash value?
Some cash value policies have low values early, which build later. In others, the values are spread out gradually as one advances in age. An agent, financial advisor, or a representative from an insurance company should present you with an example that displays future values and benefits. Most term policies do not have a cash value.
KEY POINTS TO REMEMBER:
1. You must understand how your policy works and clearly be sure of what the payouts will be.
2. Fill the application truthfully. It is because insurance companies crosscheck your answers. Review the application before you sign, as in any other type of insurance product, any false statement on the application may lead to reduced or canceled coverage.
3. Read the policy with your benefit information to make sure you have all the correct personal information, including the beneficiary’s Social Security or tax ID number.
4. Insurance companies cannot pay a minor. Consider giving the money to an estate or trust instead.
Conclusion:
This is a huge financial decision and can greatly impact the future stability of your family. Whether you choose term insurance to cover yourself for a cheap, time-limited period or a cash value policy with investment potential, consider all aspects of your personal and family needs. Knowing the different types of policies and asking critical questions is essential to understand the benefits, premiums, and conditions of your policy. Be aware of renewal options, premium affordability, and cash value features. Always fill out the application honestly, verify beneficiary information, and consult with a trusted advisor. This way, you ensure that the policy you choose provides lasting security for your beneficiaries when they need it most.