The Basics of Life Insurance
Purchasing life insurance is the best way to ensure
your loved ones are adequately provided for in case of your death.
How? By guaranteeing your family's survival in your
absence. Life insurance can help your spouse pay off your home mortgage, provide
an education for your children, supply monthly income for a period of time, or
even leave your family savings.
Let's face it, no one ever plans for their family to
go unprotected. But that is exactly what happens every day due to lack of
preparation. That's why it's so important to get educated so you can find the
life insurance protection that fits your family's needs.
There are many different types of life insurance
available, each designed to fit unique circumstances and individual needs.
Depending on whether your goal is to leave money so
your family can pay your final expenses or simply to provide them with savings,
one of the following types of life insurance should be just what you need:
- Term life insurance: the simplest
form. You purchase coverage for a specific period and, if you die during that
time, your beneficiary receives the policy's value. Term insurance includes
no investment component.
- Whole life insurance: a policy
purchased to cover you for your whole life, not just a set period of time.
Premiums remain level while the policy is in effect, and the insurer invests a
portion of your premiums, building the policy's value over time.
- Universal life insurance: used to
accumulate investment. You pay a minimum premium plus an amount you
would like invested. The insurer chooses the investment vehicle, usually only
bonds and mortgages, and both your investment and its returns are placed into a
cash-value account. This account may then be used to pay future premiums, or it
may continue to build.
- Variable life insurance: similar
to universal life insurance, but includes a broader selection of investment
products, including stocks. Beneficiaries receive the policy's face value, OR
that amount PLUS the value of your investment account.
How to Get the Best Rates
There are five ways to ensure you get the best
rates, along with the best life
- Always tell the truth when
applying for life insurance. Lack of disclosure can cause your policy to be
revoked within the first two years.
- Go over your policy and reapply for lower
rates when there are changes in your health.
- Schedule required medical tests for first
thing in the morning. During this time, your blood pressure and
cholesterol levels are lower and you're less stressed.
- Shop around for your life insurance plan.
This purchase represents a big decision and a large financial commitment, so
comparison shopping just makes sense.