Are you currently shopping for a life insurance policy and wanting to know how to make an informed choice? Many people obtain new policies every year, and a majority of them focus too much on the type of the policy rather than the carrier or the details of the coverage. Once you’ve identified a high-quality insurer, the logical second step is to choose between term and life. For the average consumer, those first two steps are as simple as doing some online research to find reputable companies and then making a decision about the kind of insurance they want.
Life insurance is not for you, its for your peace of mind. It’s for your family’s financial future. It’s about being responsible for others even if your not there.
Whole life insurance
Whole lasts until you want to cancel it, often comes with a savings component against which you can borrow, and includes several other features. Whole life if more expansive and can offer cash values that can be very important in certain situations.
The typical term contract, on the other hand, lasts until the fixed time period passes, has a fixed death benefit, and usually has few other options. Short term usually gives you options between 10, 15, 20, and 30-year terms. Most importantly term is much more affordable and generally recommend among top financial advisors.
Of course, the above is a very general summary of the two basic kinds of policies. The devil, as the old saying goes, is in the details.
The smart way to shop for suitable coverage is to examine each product, feature by feature, in order to understand what you’re getting for your money. Here are some of the most important things to look for based on your particular needs.
If you opt for contracts other than simple term arrangements, it’s possible to choose from a wide variety of savings features. Some allow you to ramp up the cash value rather quickly and earn interest on the balance. Others are slower, pay little interest, but include other perks that offset the weaker savings provision. These pieces of the contractual puzzle can be rather complex, so it pays to read the fine print and study prospective products closely. If you don’t understand how a particular aspect works, feel free to call an agent and ask.
What’s the upside of this component? For most people, it’s the chance to borrow against that built-up value at a low rate of interest. There are literally hundreds of different ways that carriers set these arrangements up. In their most basic forms, the contract holder can borrow up to the cash value at a minimal interest rate and pay the funds back on their own schedule. Any funds not repaid at the time of the contract holder’s death will be deducted from the final payout amount. For people who choose to put large sums of money into whole life policies, the ability to borrow against the amount can be a prime reason for choosing this kind of coverage.
If you want to have more control over how the company invests the premiums you pay into the contract, it’s possible to select a variable product. You won’t have full control or the ability to select stocks, bonds, and mutual funds. The company will, however, allow you to select from a menu of mutual funds. It’s possible to gain or lose cash value based on how the funds perform, which makes this feature a no for more conservative-minded people. But if you like the idea of have some choices about where your premiums go, then variable products could be a good fit.
Viatical Settlement Options
The word viatical comes from a Latin term that means provision. If you own a policy and want to sell it after becoming terminally ill, it’s possible to do so with a viatical settlement. People who choose this route are usually quite ill and often have less than a few years to live. They often use the proceeds to cover medical bills and living expenses during their final years. Fortunately, it’s easy to estimate the exact value of any life insurance policy in a few seconds. That way, you can decide whether a viatical settlement is the right choice when illness strikes. It’s a good idea to ask carriers about how they handle viatical settlements, which policies bring the highest values, and how often their clients choose to obtain funds in this way.
When the insured wishes to provide various kinds of financial services for family members, it’s possible to add a rider to that effect when carriers allow. After you die, the company will provide impartial financial counseling so your loved ones will have a starting point for understanding all the implications of receiving a financial payment.
Premium and Benefit Flexibility
When people hear about universal insurance, they often don’t realize that the word signifies a special kind of contract provision, namely one that allows the insured to change the death benefit and the premium amount without having to purchase a fresh policy. Universal contracts are designed for those who want flexibility in not only the amount of coverage they need but in the amount they pay into the arrangement. As people move from their twenties and into middle age, their incomes often rise substantially. Often, they don’t want to change insurers or coverage types, but they do want to ramp up their death benefits and possibly are willing to pay higher premiums.
Long-Term Care Features
Some carriers offer this special feature that helps the insured use part of the death benefit to pay the cost of long-term care. This kind of rider is simply one of the many ways of switching some of the death benefit payout and letting you use it for a necessary medical situation before you pass away. Note that when this feature exists, your use of it will reduce the death benefit by a stated amount. Always make sure you know exactly how much of the funds you can use before your payout is substantially reduced.
One of the few extras that you can purchase with some types of term coverage is mortgage protection. If you die before your home is paid off, the death benefit will pay it in full or may pay your heirs so they can pay off the mortgage themselves. This provision can be quite costly and some of the sellers are banks, not traditional insurance carriers. Always study the fine print of any contract that contains mortgage protection.