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What you should know when buying life insurance.
The world of insurance is an often confusing world with terms and language that most of us never have to deal with. We hope in this article to give you the main points to consider in purchasing insurance that will cover your loved ones needs in the case of your death. No advice given on a website, book, magazine or other public source is going to be all you need. There is no substitute for working with a financial adviser or insurance salesperson.
How much coverage will you need? This is one of the first questions to ask. Too much coverage will cost you a lot over time and not enough coverage will leave your loved ones in a bad position. An insurance salesperson or financial adviser can help you choose the right kind of coverage to ensure your family is well cared for should you pass away.
What kind of policy should you get? There are two main types of policies with life insurance. One is a term insurance that you pay on for the length of the term and pays death benefits if you die during that term. The other major type of policy is a permanent policy that you pay on for the rest of your life and will pay full benefits on your death.
Why do they want to do medical test? The insurance policy is a risk taken by the insurance company. The risk is that you will die and they will have to pay benefits in excess of what you have paid into your policy. These types of medical tests help to set what you premiums will be in consideration of how long you are expected to live.
Who should I name as a beneficiary? Name a specific individual rather than leaving the policy to your "estate". Always name a contingent beneficiary or someone who will be paid death benefits if your primary beneficiary passes on before you. Be extremely specific when naming beneficiaries as wording it wrong may open up questions as to your intention then the courts will have to decide who gets what.
Should I change my policy to a better one? Depending on how long you have had the original policy and what kind of health changes you might of gone through this may or may not be a good idea. Keep in mind that any premiums paid will likely be lost and if you have permanent life insurance you will loose all the accumulated funds you have paid into it.
What if I can't make my premium payments? In the case of a term policy you are usually given a 30 day grace period and failing to make a payment in that time your policy will be normally be dropped. With permanent life insurance policies they may be willing to work with you by withdrawing some of you cash value to help you make that payment. Each company will have their own policies.
Should I take a basic policy or add features and benefits? Additional features are called "riders" and purchasing these is a matter of what your needs are and your budget. Some to consider are:
1.Disability waiver of premiums – This states that if you become disabled and are unable to work or earn income to pay your premiums then you do not have to pay them.
2.Accidental death benefits – If your death is caused by some kind of accident the death benefits will be higher than they would be otherwise.
3.Accelerated death benefits – If you become ill and require long term treatment your death benefits may be paid to you before you death.
There really is a lot more to life insurance than we covered in this short article. Each point could easily have a full article or even a full book written about them. Don't let that discourage you from trying to understand it all. A good financial adviser or insurance sales person will be able to help you through most of this and what you learn up front will just help to speed up the process and make it easier for you to work with insurance professionals.
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