Purchase Life Insurance
The decision to purchase life insurance is arguably one of the best steps a person can take to ensure the financial stability of loved ones. Without a doubt, the one constant is that everybody eventually dies. But nobody ever knows exactly when it will happen. "A man's heart deviseth his way: but the Lord directeth his steps." (Proverbs 16:9) Financial stability or instability at the time of death will greatly affect those left behind. So strong financial planning might include the buying of a good policy. Before going out to purchase life insurance there are several things to consider. First, is the type of policy and needed benefits. Although several types of policies are available to choose from, the three more common types will be discussed in this article: term, whole, and universal. Costs will vary for each type of policy. Benefits, age, and health will also affect the cost. Second, how much coverage can a person afford to buy should then be carefully considered. Finally, is the policy going to be an investment or simply a means to pay beneficiaries at the time of a person's death? A good place to begin is with the types of policies available.
Term insurance is probably the most common and the most basic policy available to those people seeking to purchase life insurance. This type of policy is bought for a specific term. Although terms will vary depending on what a person is looking for and what a company offers, a policy could be bought for one, five, or ten years. Premium payments will also vary depending on the policy agreement. With a term policy, death benefits are paid only if the death of the insured occurs during the specific term period. Premiums and benefits will remain constant for the term of the policy. Term policies pay no other benefits than what was purchased. It is not an investment. However, those looking to buy a term policy have several options available to them. One option is what's called the convertible term which allows a policy holder to covert the basic policy to another type of policy that builds cash value. Another option is called renewable term insurance. This option allows a policy holder to renew the policy at the end of the original term. With this option, premiums may not remain constant and the company may impose an age limit at which time no more renewals will be permitted. With the re-entry term; the company may ask for a medical examination to renew the policy.
A second option for those seeking to purchase life insurance is to buy a whole life policy which covers a person up until their death, not just a specific period or term. Once purchased, death benefits and premiums will remain constant for the duration of the policy. This type of coverage is an investment because whole life policies build up cash value. In other words, the policy has a greater value than just the death benefits that are paid to beneficiaries upon death of the policy holder. The company will apply a portion of the premium directly toward the insurance itself. Some of the premium will go toward administrative costs. But, some of the premium will go toward the cash value. What happens here is that the company invests the cash-value portion of the premium and the policy holder might get a portion of any profits that are made, which are directly tied to the company's investment skill and policy.
Since whole life is an investment, the returns might be tax deferred. Keep in mind that the beneficiary receives only the death benefit, which is the face value of the policy that was purchased. None of the cash value of the policy will go to the beneficiary. Any accrued cash value will remain with the company to offset the cost of maintaining the policy. For people who have a large chuck of money to spend at one time and are looking to purchase life insurance, they might consider single-premium whole life insurance. Once bought, no additional premium payments will ever be made. Death benefits will remain constant. Universal life insurance is another option for those seeking to purchase life insurance. Basically, universal is a form of whole life but with more flexibility. Consult with an agent to determine what type of policy is appropriate.
Once a type of policy is decided upon and a person starts looking into companies to purchase life insurance from, things might get more confusing. A handful of independent companies analyze and rate providers. Ratings are published and are available in numerous locations. Compare ratings from several companies before making any decision. It's easier to purchase life insurance from a knowledgeable agent who doesn't use high-pressure sales tactics. An agent might represent products from one company or from several. It's possible to buy a policy from a traditional agent down the street or to go online. This is completely acceptable. But, no matter where the policy is bought, try to collect as much information as possible. Talk to friends and relatives about the policies they have and where they bought them. Unfortunately, sometimes it's not as simple as just finding the right policy. Many companies require qualifying medical exams before issuing a policy. They also put people in low and high risk categories. Obviously, insurance companies are out to make money. They do that by insuring young and healthy people who will pay enough money to cover the expense of the policy before dying. Policy premiums are generally based on age. Some companies will not insure people once they reach a certain age.
Buying Life InsuranceWhen buying life insurance, the purchaser needs to have done his homework prior to meeting with an insurance salesman; this ensures that the buyer will be able to discuss knowledgably what options will best fit his needs. In truth, many find the concept of selecting a policy to be overwhelming. With so many different types of policies, amounts, and variables to consider, it is not surprising that many people do not even know where to begin. But a consumer does not have to be solely at the salesman's mercy; he can educate himself on the differences between the types of policies and can decide what amount of coverage will be sufficient, thus taking much of the stress out of buying life insurance. By doing all of this and researching on his own, the buyer all but guarantees that he and his family will be taken care of in the event of a death.
No one really wants to think about the necessity of buying life insurance, especially not those in the early stages of life. The mere thought is depressing, as admitting the need for insurance means facing one's own mortality. But the Bible clearly says, "And as it is appointed unto men once to die, but after this the judgment" (Hebrews 9:27). Unfortunately, no one can predict when a loved one is going to pass away, and accidents and illnesses can strike quickly. There is nothing worse than a family having to wonder how they are going to pay left over hospital bills, or any other remaining debt, not to mention, of course the costs of burial. Whether a person is in the flush of youth, or has lived many years, having a current, up to date policy is the best way to ensure that no one is caught unaware.
One of the trickiest aspects of buying life insurance is deciding on a policy amount. Most reputable companies offer an extremely wide range for their customers to choose from. Some go as low as $10,000, and the high range is virtually unlimited. The amount a person ultimately chooses depends on several factors. Before going to purchase a policy, a person needs to consider how much a funeral, and all that a burial entails, costs. In addition, the number of dependent family members who will survive the insured, the quality of life that family is used to living, and the amount of debt that a person might leave behind should all also factor into the decision on how much a policy should be worth.
If a person is single, for example, with no children or people who rely on him for financial support, buying life insurance with an amount small enough to just cover burial costs, and perhaps a few miscellaneous bills, would be sufficient. Those who have children, however, need to think about how much should be left behind in the event of a death, especially in the event of an unexpected, untimely passing. Another factor to take into consideration before determining the monetary value of one's life insurance is the way the family is used to living. While, after a death, the family will most likely be unconcerned with living in the same style as before, someone's quality of life includes the every day, monthly bills. A family's mortgage, car payments, and other utilities still need to be paid after a provider's passing, and it may take some time for the family to figure out how to handle a decrease in finances. Also, if a person has a large amount of debt accrued, either through credit cards, mortgages, etc, then having a larger policy will allow the surviving members to easily dispel any outstanding balances.
Even after buying life insurance, a person cannot just pay the bill and forget about the policy. Significant life changes are bound to happen, and they may affect the suitability of one's policy. For instance, if a married couple has a child, the amount of life insurance for both parents should probably increase. The reason for this is simple; after having a child, should one of the parents die, there are two survivors rather than just one. And having a larger policy will help those who remain adjust to no longer having a provider's income. By the same token, after a divorce, or once a person clears a large amount of debt, or any other event that limits someone's financial obligations, the policy amount can be adjusted down. Also, in times of inflation, a person should consider whether his policy is actually worth what it was when he initially purchased it. Obviously, there are many different variables that affect the value of a person's insurance, and the policy should be reevaluated on a fairly regular basis.
Many underestimate the importance of having a current life insurance policy until it is too late. The reasons for delaying purchasing a policy are many, but none is so important that a person should procrastinate on buying life insurance. Doing so is the best possible way to ensure that one's family is sufficiently cared for after a person passes. And in truth, during such a difficult time as the passing of a loved one, the very last thing the family should have to worry about is whether they can pay for a funeral, or if they have enough money to take care of what needs to be taken care of. Buying life insurance is a person's chance to give his family a gift that will help ease an extremely difficult time in the future.