We protect our cars, our homes, but one of the most overlooked areas is life insurance. Many people know that it protects their loved ones in the event that they should die. In essence that is the most important thing they should know about life insurance, but there are many things they should consider.
The first thing they should determine is what kind of insurance is best for them. While I believe that most insurance agents have their prospects best interest at heart, it is a hard fact that some insurance agents get paid to sell insurance and that is their motivation. If a consumer is educated in some of the aspects about life insurance, then this will make it harder for the hard pressing insurance agent to take advantage of them.
I suppose that there are countless numbers of different insurance policies, many of them having different bells and whistles, such as return of premium after 20 years, but in essence there are 3 kinds of insurance policies: Whole Life, Term Life and Universal Life.
Whole Life is insurance that will remain in force until you die, as long as the premiums are paid. The advantage of Whole Life is that as long as the premiums are paid, some day those premiums will not be paid in vain, there will be a payout for your beneficiary, some day. Generally, the death benefit increases over time with whole life policies. This is important because it provides some protection from inflation.
Term life is what many insurance agents refer to as a rented life insurance policy. A policyholder will get a policy that provides them with life insurance for a period of time; it could be 1, 5, 10, 20 or 30 years. The advantage of term life is that it is very inexpensive, considering the death benefit. The disadvantage is that after the time period is up, the benefit disappears. Many insurance companies do allow a renewal of another term policy, but the cost will increase as the policyholder gets older.
The last kind of insurance is a Universal Life policy and it is somewhat a combination of a Whole Life and a Term Policy, but there can be risks associated with it and it is best to speak with an agent and learn about the risks associated with it. The primary risk is making sure that the Universal Life Policy remains funded properly.
So which one is the right one and how do you choose? There are many factors to consider, such as how much you can spend on insurance, what are your current fixed and variable expenses.
Generally the best thing to do is take into consideration whether or not an expense will be with you and how long. For example, if you have a 30 year mortgage for $250,000, it might make more sense to purchase a 30 year term policy for $250,000, rather than a whole life policy for the same amount because the house will most likely be paid of and will no longer be a financial burden. On the flip side, you know that you will eventually die and with death there will be burial expenses, so it makes sense to estimate the cost of burial and purchase a Whole-life policy based on your estimate.
There are many factors to consider when purchasing Life Insurance and today it is very easy to go on-line and recieve multiple quotes instantly on-line, but Life insurance is too important to you and your family rush into a decision, but it is also too important to procrastinate and not accomplish. The best thing to do is visit with 2 to 3 insurance agents and go over a few scenarios with them. If they will not spend the time with you or if they do not understand that you want to make sure that you are examining all of your options, then they are probably not working with your best interests in mind.