What to Look Out For When Buying Life Insurance
When buying life insurance, there are certain pitfalls and pros that you should look out for so that you know which policy is right for you and for your family. Beside, it is all about the condition of your family after you die and you want to make sure they are in the best condition possible.
So the first thing that you need to do is assess the different types of life insurance. Those types are: Term, Whole, and Universal. Term is an easy type because you have a fixed premium for a fixed period of time for a certain amount of coverage. In other words, you can choose a 20 year policy that will cover you for 20 years for the same premium. If you renew at the end of that 20 years, the premium goes up.
Whole life provides coverage that is guaranteed and at a rate that never changes. The premium is higher than term. However, unlike term, whole life gains cash value through an annual dividend. This divide allows the coverage to stay right with inflation because funeral costs and other expenses will not be tomorrow what they are today.
Universal is a mix of both of these and does provide a number of options throughout the life of the policy. You can even vary the amount you pay monthly.
What are the pitfalls?
When choosing a life insurance policy, there are pitfalls. For instance, you want to make sure you're not dealing with an agent who tries to get you to pay as much as possible. Is it really necessary to have that million dollar life insurance policy? Think about all of your current expenses and what they are now. You also want to take into consideration your long term expenses such as your mortgage and how much money your family may need after you pass.
Yes, it can be tempting to give them a million dollars, but sometimes it can be more trouble than it is worth. You also have to take into consideration how much you can afford in a premium now. If you think you may change your mind later, you can invest in a Universal life insurance policy that will allow you to freely make changes.
Another pitfall is to be mindful of anything in small print. Know your policy before you commit to it. You want to make sure that it is definitely going to pay upon your death rather than giving your family the runaround because of a small technicality.
There are some pros to life insurance policies as well. Be on the lookout for policies that pay a considerable amount for great rates. Yes, these are more prevalent in term policies. Term policies are the purest form of life insurance and less risky for life insurance companies because it is less likely they'll actually have to pay.
There are also some policies that do not require medical exams. If they do, do not fret. A medical exam can be a great way to let you know that you are in great health. And if you are not, at least you can find out about it.