If you’re considering a life insurance policy, take your time, and don’t dive into the water head first. 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 the needs of 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 or not 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.
Confusing Insurance Agents For Advisors
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 and how much you can afford to pay, you’re more likely to receive suitable plans that fit your needs.
Your Employer Has You Covered
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 insurer’s payout risk increases. 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.
Confusing Life Insurance For An Investment
Because life insurance policies trigger payment when you pass, people sometimes confuse the product for an investment. While the proceeds will undoubtedly help your loved ones during their time of need, whole-life insurance policies are extremely expensive and usually 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.
Borrowing Against the ‘Cash Value’ Of Your Account
When you purchase whole-life insurance, the insurer sets up an investment account where a portion of your premiums are used to grow the balance over time. Because fees and expenses are high in the beginning, your cash value will be minimal in 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.
Buying Multiple Policies From The Same Insurer
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.