If you’re considering a life insurance policy, take your time, and don’t dive into the water headfirst. Many insurance agents try and sell you on the benefits of ‘complete coverage,’ but these plans are usually the most expensive and may not fit you or your family.
Dealing with insurance agents also requires plenty of disclosures. You may need to submit blood work or undergo medical tests to determine whether you qualify. You’ll also have to answer personal questions that you may not feel comfortable telling a stranger. But, when you do your homework ahead of time, you can avoid some of these unnecessary headaches.
When meeting with experts in any profession, most people assume the person across from them operates from a position of trust. But, insurance agents don’t have a fiduciary duty. They earn a commission, which increases with the cost of your life insurance plan. Before taking their advice, make sure you do some research beforehand. When you enter the meeting with data on the coverage, you’re looking for how much you can afford to pay. You’re more likely to receive suitable plans that fit your needs.
People often assume they don’t need life insurance because they have coverage through their employer. But, most employer plans only cover one year’s salary or less. If you have dependents or care for an elderly parent, the payout won’t be enough to maintain the support they need.
Remember, as you age, life insurance becomes more expensive. Premiums increase because of the increased insurer’s payout risk. So, take the time to read your employer’s plan. Pay careful attention to what’s covered and what isn’t. That way, you’ll be able to decide early on whether an external life insurance plan is right for you.
Because life insurance policies trigger payment when you pass, people sometimes confuse the product for investment. While the proceeds will undoubtedly help your loved ones during their time of need, whole-life insurance policies are costly. Usually, they require additional investment to build up the funds. It’s necessary because whole-life insurance doesn’t expire, and you’re guaranteed a payout whenever you pass. Conversely, term life insurance has a fixed expiration period, and if you outlive the policy, you don’t receive any benefits.
When you purchase whole life insurance, the insurer sets up an investment account where a portion of your premiums is used to grow the balance over time. Because fees and expenses are high in the beginning, your cash value will be minimal in the early years. However, as time passes and the cash value builds, the proceeds can be accessed when you need them. You can withdraw money to pay bills or close your policy and collect the entire amount. The insurer also provides the option to borrow against the account. However, you need to pay interest, and if you pass before repaying the funds, your beneficiaries won’t receive anything.
Bundling your home, auto, and life insurance policies under one roof can seem like a convenient option. But, one insurer rarely has the best offers for all three. You’re better off spreading your policies across multiple insurers to make sure you get the cheapest products.
Remember, the insurance business is extremely competitive, and insurers offer discounts and bonuses to lure new clients. And by being patient and selective, you’re bound to find products that are right for you.