Most people don’t think about life insurance until they have to, that’s the absolute wrong way to do it. Buying life insurance becomes important as soon as someone else’s life depends on you. In this guide we outline the basics of life insurance. How much does it cost, when does it pay, how to save, and how to be clever about selecting options.
Life insurance helps families plan for final expenses. The purchaser pays annual premiums and in exchange the insurance company will pay a sum of money to a beneficiary soon after the insured dies. The person purchasing the life insurance policy does not have to be the same party being insured. It’s not unusual for people to buy insurance on behalf of family members, such as spouses or elderly parents. Some contracts include the option to receive the payment if the insured person is diagnosed with a terminal or critical illness. Policies can also vary in length from a set amount of time or until the insured person dies.
How to shop online
Websites that compare life insurance quotes are a valuable resource. In general, most insurance companies give customers the option to calculate insurance quotes on their websites. Third party websites also provide ways to visualize and compare similar policies from different providers. The best of these websites can be used to create custom packages and then search for policies matching a list of needs.
These are factors which may make a policy more or less expensive.
The amount you pay monthly will be determined by your response to a number of questions including: age, gender, use of nicotine, medical history, dangerous activities, driving history, and more. In general, if the insurer sees a family history with heart disease or cancer, they will ask for higher monthly payments. If you have past vehicle accidents or a history of risky jobs, such as working in high-voltage power line maintenance, these will also raise the cost of life insurance.
Evidence of smoking will raise the cost of life insurance significantly. In fact, people who smoke usually pay premiums several times higher than those who are nonsmokers. However, even smokers can have alternatives to reduce their premiums. Not smoking for a year or more is enough to lower your rates significantly.
Where you live can impact how much life insurance will cost
For example, a company that operates in a state known for its dangerous industries, high crime or natural hazards may charge higher premiums on life insurance policies to people who are more likely to perish as a result of those risks. Most insurance companies rely on statistical data (usually “mortality tables”) to predict how much money they expect to pay annually due to policy claims. If the likelihood of certain death-related events is high, an insurance company may adjust the price of its life insurance policies to offset the additional risk.
Borrowing cash from your life insurance policy
Depending on the type, a life insurance policy can accumulate cash value, which works like a traditional bank savings account where the insurance company deposits part of the premium payments. The accumulated cash value can be borrowed by the policyholder without affecting the overall insurance policy or the death benefits included in the contract. If the life insurance policy is cancelled or the insured party dies, the benefactor receives the total amount of accumulated cash value minus penalties. In the next section, we provide extensive information on which types of life insurance policies exist.
|Choosing a type of life insurance policy
Before purchasing life insurance, you should be aware of the different life insurance
Prepare yourself physically. All sorts of health factors including weight and cholesterol will have an impact on the cost of life insurance rates. If possible, work on your health for six months to a year before applying for life insurance. People with medical conditions like diabetes or hypertension will be given higher rates if not receiving proper medical attention.
Be sure not to commit more capital than you can afford. Many policyholders will abandon their life insurance policy after only a few years. Purchasing a term life insurance may be a good option if you can commit to locking up funds for up to 30 years or more. During that time, term policies make it burdensome to draw cash from the fund. In contrast, a whole life insurance policy allows the insured to withdraw or borrow during the life of the policy
If you are still unsure about Life Insurance options, consider talking to an experienced broker. Be prepared with a short list of companies and ask which of them may have the best rates according to your health profile. Another option is to do the research on your own.