Finding the Right Kind of Insurance

All life insurance policies are not the same. Some cover you for your lifetime and others cover you for a specified period of time. Some build cash values and some do not. There are also policies that combine different types of insurance or let you change from one kind to another. There are also policies that may offer benefits, such as a monthly income, while you are still living.

There are basically two types of life insurance: term insurance and cash value insurance. For the most part, you will pay less for term insurance in the early years, but it is not considered an asset because it doesn't build cash value that you can borrow against or otherwise use. Term premiums pay for death benefits. Cash value insurance generally has a higher premium because it pays for the term insurance and the remainder of the premium is invested by the company, thereby building cash value.

Your choice should be based on your needs and especially what you can afford.

Buying Life Insurance

When purchasing life insurance, you should make sure that the coverage fits your needs. There is a decision making process which I have broken down into steps for you.

Step 1- Decide how much you need
Step 2- Decide for how long you will need it (until the mortgage is paid off, etc)
Step 3- Decide how much you can afford to pay
Step 4- learn what kinds of policies are available to meet you needs
Step 5- choose the combination of policy and premium and benefits that emphasizes protection in case of early death, or benefits in of long life, or a combination of both.
Step 6- Ask an insurance agent to review your decision with you
Step 7- Make committments you will keep- especially where your budget is concerned

One other thing to keep in mind is that when looking for an agent, it is a good idea to look for an agent who can quote your policy through multiple companies to find the best deal for you. Agents who work for one company may sell a very good product, but they are limited in that they can't shop around for you. I'll talk more about Agents in another post.

Important things to consider before buying life insurance

The National Association of Insurance Commissioners prepared a Life Insurance Buyers Guide that gives the following list of items to consider when shopping for life insurance.

1. Review your own insurance needs and circumstances. Choose the kind of policy that has benefits that most closely fit your needs. Ask an agent or company to help you.

2. Be sure that you can handle premium payments. Can you afford the initial premium? If the premium increases later and you still need insurance, can you still afford it?

3. Don't sign an insurance application until you review it carefully to be sure all the answers are complete and accurate.

4. Don't buy life insurance unless you intend to stick with your plan. It may be very costly if you quit during the early years of the policy.

5. Don't drop one policy and buy another without a thorough study of the new policy and the one you have now. Replacing your insurance MAY BE COSTLY.

6. Read you policy carefully. Ask your agent or company about anything that is not clear to you.

7. Review you life insurance program with your agent or company every few years to keep up with changes in your income and your needs.