Feb 2, 2019

7 Things to Know Before Purchasing Life Insurance

Purchasing a life insurance policy is a great way to protect your family in the event of your death. The funds can be used to pay off debts, including a mortgage, so that your family won’t have the added stress of a move in addition to managing their grief. It also can provide for your children’s educational, medical and other needs as well as cover the high funeral costs. Choosing to purchase life insurance is a smart decision but before you take that next step, you need to know these 7 things:

  1. There is more than one kind of life insurance. Term life insurance is active for a limited amount of time, often 5, 10 or 20 years, and then it expires. You may be able to renew the policy but the premiums will go up. Term life is the least expensive policy and easiest type of life insurance to be approved for. Some companies allow you to convert the policy from term to whole life at a specific point in time. Whole life insurance policies are active as long as the premiums are paid. It builds up cash value in addition to the death benefit, which you can use for other purposes. The long-term security of these policies means that they are a good choice for those who can afford the higher premiums.
  2. You must answer all questions truthfully. When completing a life insurance application, you will be asked a number of personal questions about health issues, personal habits, past problems, and more. You must answer them completely and truthfully or you risk a benefits denial if your lies or omissions are discovered. It is better to be denied coverage up front than to pay premiums for several years only to have the coverage denied later.
  3. Know how much coverage you need and want. Your coverage needs will depend on where you are in life, the age of your children, the amount and time remaining on your mortgage, the level of other debt you carry and more. The goal is to assure that your family will not be overwhelmed by financial challenges in the event of your death. Another consideration is what do you want to leave behind? If you have no significant debts, you could purchase a low-payout policy to cover the funeral costs and other expenses or you could go with a higher payout to leave something behind for your children and grandchildren or to your favorite charity.
  4. Premium Payment Methods. The primary reasons life insurance benefits are not paid to loved ones is that the policy has lapsed due to failure to pay the premiums. Choose a policy that includes an automatic withdraw option for policy premiums so that you never miss a payment and your family is fully protected.
  5. Underwriting Considerations. The state of your health will directly determine the rates you pay for life insurance. People in perfect health often qualify for “preferred” or “super preferred” rates. For those with risks, such as smoking behaviors or chronic health issues, the rates will vary widely. However, more and more insurers are offering good rates to people with chronic conditions that are well managed so it pays to shop around. Working with Alliance or other great insurance brokers is the best way to find the lowest rate with the best benefits based on your medical and lifestyle considerations.
  6. It’s important to compare policies before purchasing. Some policies might offer great initial rates that rise steeply over a short amount of time. Others might have the term coverage you want now but with no ability to convert to a whole life policy later. Know what you want and compare policies to select the one that best meets your current and future needs.
  7. Prices will never be lower. When purchasing term life insurance, the younger you are the lower rate you will have for the duration of the policy. This means that today, no matter how old you are, you will pay a lower rate then you will next year or the year after that. If you are considering term life insurance, buy it now to receive the best possible price for you. For whole life policies the initial rates are set for specific periods of time, usually between 5 and 10 years, then the rates will increase as you age. Again, you will get the lowest personal initial rate today so if you are planning to purchase life insurance now is the time.

Selecting the right life insurance policy, completing the application process and starting your coverage isn’t as clear cut as you might think. We can help you identify coverage options and select the best carrier based on your current health status and long-term goals. You don’t have to do this alone. Complete an online request for a quote or call us at (866)771-4715. And remember, you aren’t getting any younger.

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