The long-term nature and importance of life insurance in critical situations makes carrying out a proper life insurance comparison crucial. By doing so, the life insurance that will put your mind and ease and provide protection can be found at an affordable price.
Reasons to get life insurance
Life can be deadly, and it is only natural to want the peace of mind that comes from knowing a sudden illness or death will not cause your loved ones undue hardship. Life insurance can do more than just provide for those close to you after death. Depending on the type of insurance, it can be used to cover mortgages, personal and other debts in the case of sudden illness, loss of a job or other special situations. In addition, life insurance can be used to save for retirement and often offers tax advantages.
Doing a life insurance comparison
There is no telling when life insurance will be needed, and the costs of purchasing it only increases with age. Therefore, there is no time like the present to get started. If using an advisor for life insurance comparison, make sure the advisor is independent of any company and is dedicated to finding the best rate wherever it may be.
Not surprisingly, the internet has many good tools and sites that help people do life insurance comparisons and the best rates. Make sure the site utilized is providing quotes from a number of companies and check several different websites to make sure you are getting the most suitable plan. One good website to start at for reviews and comparisons is Topreviews.
Before comparing life insurance
Like so many things in the modern world, life insurance can be complicated. There are a number of things to understand and choose from. The following guide will help you get started.
With life insurance, it is first necessary to be familiar with the two most basic types. These are term life and permanent.
Term life is more traditional an insurance policy. Benefits are only paid out if the insured passes away while the policy is in effect. These policies cannot be cashed out and are limited to a set period of time (typically 10-30 years) unless renewed. On the plus side, the premiums will be lower than other types of insurance.
Permanent, on the other hand, will build up a value that can be cashed out after the premiums are paid for a number of years. In other words, it contains an investment component as well as a death benefit. Depending on the policy, this investment component can be withdrawn or borrowed against after at a set period of time, and the premiums are generally fixed. However, the premiums will be much higher since some money must go to build up the investment component.
One criticism of permanent insurance is that the investments generally do not do particularly well, and the fees are high. Therefore, most are better off building up their retirement investments elsewhere. Still, whole life can be the way to go in some situations since it offers a lifetime of insurance and can work well with estate and retirement plans. In addition, the growth in value is tax deferred.
Types of permanent policies
- Whole life: The most common type and often more expensive, its benefits include cash-deferred growth, ability to access cash values and dividends (although they are not guaranteed).
- Universal life: This is similar to whole life but offers more flexibility to include the ability to borrow against the cash value as well as flexible premiums and death benefits. However, it offers fewer guarantees on the cash value.
- Variable life: This type of permanent life insurance allows the cash value to be invested in stocks, mutual funds and bonds for higher returns as well as the ability to borrow against the policy.
Factors that are looked at and looked for
- After age, the most important factors that life insurance companies will take into consideration include occupation, medical history and sometimes family medical histories.
- Due to the long-term nature of life insurance, it is paramount to check the credit worthiness of any insurance companies. Rating agencies to include Standard & Poor’s and Moody’s can be looked up online. The insurer should be rated from A to AAA.
- If possible, compare the claim records of the companies and ask questions to see how helpful their customer service is.
- When the premiums are not fixed, pay careful attention to when they can be raised and by how much.
- With payout amounts having such a huge influence in premiums, carefully consider how much insurance is needed before making your life insurance comparisons.
Tips for saving on life insurance
- Term life is generally the better value: While some recommend permanent life as a kind of forced savings, they really should not be thought of as any kind of traditional investment. Withdrawals need to be repaid or the value of the benefit will be reduced. The premiums for permanent life are considerably higher, and it is better to put the difference into regular investments.
- Guaranteed issue policies are not for the healthy: These polices are easier to get (there is no medical exam, and they may only require that you answer a few questions) but are for the higher risk who cannot get insurance elsewhere. This makes them more expensive.
- Buy long term of whole life: Every time a short-term policy is renewed; premiums may increase.
- Stay healthy: Factors to include smoking, high blood pressure, diabetes, heart disease and being obese can affect premiums. As the right lifestyle can reduce and eliminate these risks, life insurance is just one more reason to work on staying healthy. In addition, keep in mind that it is possible to get a lower rate if your health improves so be sure to ask if this occurs.
- Choose the cheapest payment option: Paying annually and the form of payment can make a difference so be sure to check on this and choose the best option.
- Don’t buy more than what is needed: Life insurance needs vary greatly between people and will change over time. Therefore, it is a good idea to look over one’s policy every year and reevaluate what is needed. Online calculators can help.
- Select no- or low-load policies: These policies have lower fees and will leave more money available to build cash value faster.