Selecting life insurance is not like any other purchase you will make. When you pay premiums on your life insurance, you are really buying the future financial security for your family. Your life insurance helps ensure that when you die your dependents will have the financial resources needed to protect their home and the income needed to run a household.
You can use Life Insurance to help fund other financial goals such as retirement and education expenses. However, it is important to remember that the main purpose of life insurance is financial protection.
Use the following checklist when you are considering purchasing life insurance for yourself and your family.
- Choose the right amount of coverage depending on your personal & professional needs;
- Match your current obligations with the correct product (e.g. single vs. married; mortgage vs. renting; working vs. non-working spouse - term life insurance vs. permanent life insurance);
- Choose an insurance agent who represents "A" rated insurance carriers as ranked by A.M.Best - an insurance industry rating publication;
- Look for an agent that has experience in the your business profession and offers several methods of service delivery (e.g. telephone, website, personal visits);
- Select an agent who offers both competitive group rates and competitive individual rates for more complex needs.
Choosing a life insurance product is an important decision, but it often can be quite complicated. As with any major purchase, it is important that you understand your needs and the options available to you. In addition to choosing a reputable agent that will help you through the process, you should have some basic life insurance knowledge before you make any decisions.
There are two basic kinds of life insurance: term and permanent. Term Life Insurance offers coverage for a specified length of time. It pays a benefit only if you die during the term. These policies are attractive to some people because, initially, premiums are generally lower than permanent insurance premiums. This allows you to purchase higher amounts of insurance at a younger age when the need for protection is often greatest.
Permanent Life Insurance is protection that can be kept in force for as long as you live. Premiums are usually more costly than Term Life Insurance. Permanent Life Insurance policies have a "cash value" feature that offers some options. You can cancel the policy and receive the "cash value" as a lump sum. Or, if for some reason you need to stop paying premiums for a time, you can use the "cash value" to continue your current policy for a specific time. You also have the option to withdraw part of the "cash value" in the form of a policy loan.
Your insurance agent is a good source of general information about life insurance. You may also contact the National Insurance Consumer Helpline at 1-800-942-4242. This toll-free consumer information service is sponsored by insurance industry trade associations. You can also look in your local library for magazines or books on life insurance.
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