10 Questions Everyone Should Ask Before Buying Life Insurance
Life insurance is one of the most important purchases you will make. Don’t enter the shopping process unarmed and unprepared. Before committing to any policy, here are the top ten questions to ask your life insurance agent:
1. What kind of politics makes sense for my lifestyle?
With so many types of life insurance policies available today, staying informed about all of them is nearly impossible without the proper guidance. Term, permanent, total, universal, variable, single, joint, first to die – how do you know which policy is right for you?
Many aspects come into play when searching for your ideal policy, including age, marital status, children or dependents, plans for the children, health, and travel trends. These lifestyle factors and more must be determined when purchasing a life insurance policy. Find an insurance agent who is willing to take the time to learn exactly who you are and what you need from a policy.
two. How does the policy premium work?
The money you pay to buy life insurance is called a premium. Not all policies have the same method of paying the premium – some require a lump sum, while others are paid in installments. These fees can be annual, semi-annual, monthly or even weekly. Decide which payment method is best for your current financial situation and ask your agent which method they recommend.
3. Does this policy provide living benefits?
Some policies, like permanent life, allow you to access the policy’s cash value when you need it. While the primary goal of life insurance is to provide for your family after you are gone, it can also be a way to meet your family’s needs while you live. Living benefits can be used to:
- Pay for college intuition
- Add to retirement or disability income
- Start / help a business
- Donate to charity
- Cover emergencies
Ask if using the cash value of your policy now would reduce the death benefits your family will receive later.
Four. Are there investment options with this policy?
When a policy has cash value, it is possible to invest portions of that money to facilitate growth. One of the ways to invest the cash value of your policy is in the market. Think of policies that offer this option as a combination of traditional life insurance and mutual funds as subaccounts.
Another benefit of having a cash value policy is that the interest your policy charges is not taxable. Also, once your policy earns enough interest, this money can go toward paying your premium. Be aware that some policies may generate more interest than others. If you are interested in investing, talk to your agent about the capabilities of the policies they offer.
5. What happens when the policy expires?
If you are looking for term life insurance, you are buying insurance for a specified period of time only. It basically means that this particular policy has an expiration date.
It is important to understand exactly what happens when your policy expires. If you are still living at that time, do you receive any value or benefit? Some policies offer a zero payment if the policyholder lives past the expiration date of the policy. Before buying term life insurance, take some time to understand how the policy works in such a scenario.
6. Is there a grace period for late payments?
If you run into financial difficulties at some point along the way, you may not always be able to pay your premium on time. In such a case, it is reassuring to know that your insurance provider is willing to give you some time to raise funds rather than penalizing you immediately. Most life insurance policies offer a standard 30-day grace period.
7. Is the policy’s death benefit adjusted for inflation?
Chances are, just because your policy’s death benefit amount looks like a lot of money today doesn’t mean it will be a lot of money 50 years from now. Some policies are adjustable, which means that benefits increase with the rate of inflation, while others do not. However, there are other ways to compensate for inflation, so don’t immediately rule out a policy based only on that factor. Remember; ask your agent what options are available to you.
8. What is excluded in this policy?
One of the easiest ways to fully understand a policy is to find out what it is not. In fact, ask your insurance agent to explain exactly what the policy consists of. I can not made for you. If the exclusions don’t apply to you, great! However, if what they tell you is something you need from your policy, ask if there is a similar policy that offers what it does not.
9. Can this policy be converted to another policy?
Term life insurance may be all you can afford today, but you know you want to purchase permanent life insurance later. If so, you may want to invest in a smaller life insurance plan that has the ability to transition to a larger plan without losing current benefits in the process. The insurance industry calls these policies “convertible” because they have the ability to be “converted” into another policy.
10. What if my health changes or I am disabled?
To set an appropriate premium, insurance providers find out everything they can about you, including your medical history.
The younger and healthier you are, the less expensive your life insurance should be. While you may be in shape now, there is no guarantee that your health will never change. It is good to be prepared for any possibility, no matter how uncomfortable it is to think about it.
If something affected your health in the future, would your policy be adjusted to suit your situation? Could it provide the benefits you need? How much would your premium increase? These questions are absolutely essential before buying life insurance.
Educating yourself about life insurance could be the difference between finding the right policy and getting stuck with one that doesn’t fit your needs or life circumstances. Before making big decisions, ask your agent or supplier these ten questions. If they are unwilling or unable to provide satisfactory answers, it may be a signal to seek other options.
A good life insurance agent will give complete answers, and maybe even add a little extra wisdom! The more you know, the better prepared you will be; don’t let anything stop you from securing your family’s future.