No Life Insurance
Life Insurance 7 Facts You Need to Know
Purchasing life insurance can be one of the most difficult decisions to make. With so many options, how do you know which is best for you and your family? Here are some frequently asked questions you should know when looking for a policy.
1. What's the Difference between term and whole life insurance?
With term insurance you are buying coverage on your life for a certain number of years, ranging anywhere from one to 35 years. Once the period is up, the contract ends. No money is paid to you or the beneficiary (you are purely buying insurance). Whole life (also known as permanent) is life insurance combined with investment. Part of your premium goes towards a cash account which is invested and builds value. You can withdraw and borrow against that cash value. Permanent insurance does not expire; you are covered for the whole of your life as long as you continue to pay premiums.
2. What's better value, term or whole life?
Because parts of your money go towards investing, term insurance provides more insurance coverage per premium dollar. Most financial planners suggest buying term life insurance and investing your money elsewhere because it's more cost effective.
3. If I buy a policy, can I end up with no life insurance
Yes. Even if you purchase coverage and continue to pay premiums, there are circumstances where the life insurance company may deny a beneficiary's claim. Most states have a two year exclusion period. A claim will be denied if the insurer discovers misrepresentations or fraud or if the insured commits suicide within this period. Insurance companies have also denied claims where the cause of death was not covered by the policy, for example driving whilst intoxicated.
4. Can I take out insurance on my spouse?
Yes but only with his/her consent. You will also need to show the insurer that you will be affected financially if your spouse passes away. This is because you can only take out insurance on persons with an "insurable interest", preventing people taking out coverage on just anyone. This rule does not apply to purchasing a policy on your children's life.
5. How much should I insure for?
Salespersons will often tell you to multiply your annual income by a certain number (usually 5 to 7). It's a relatively simplistic answer for a most important question. You need to consider a number of issues including the beneficiary's current and future living expenses including college and childcare. Write down a list of everything your dependents will need and sum up the cost. The total figure is the amount of coverage you should have.
6. What is the medical exam?
The extent of the medical evaluation depends on the company, your age and amount of coverage. As the age and face value get higher, so do the underwriting requirements. You will need to answer questions about your current health and medical history on the application form. The test is then arranged and performed usually at your home by a paramedic. The paramedic takes your height and weight measurements, blood pressure and in most cases blood and urine samples. Older applicants with high policy amounts may be seen by an M.D. and may also need to undergo an EKG and the treadmill test.
7. Should I consider no load life insurance
No load policies are sold by the insurer directly to the public, bypassing the agent. They are cheaper because the insurance company doesn't need to pay the agent's sale commission. Whilst you may get cheaper coverage, you are left to deal with the insurer yourself and may end up with little or no customer service. Carriers and salespersons make the decision making process seem easy. Whether you're new to the life insurance scene or already have a policy, always do your research and consider your options carefully. You need to do what's right for you and your family. It's always useful to consult your financial advisor before buying and financial product.
No Life Insurance
By: Chase Hill
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