A life insurance policy is an agreement between the client and an insurance organization. A person makes regular payments (premiums); in exchange for this, the insurer pays a certain amount of money after his death. This money goes to the people who are listed as beneficiaries in the contract, usually children, spouses, or other relatives. They may use the capital to pay off debt, solve current problems, or save money for future expenses, such as studying at a university or buying a home.
The most common types of life insurance
There are several main variants of life insurance: term vs whole life. These groups include different types of policies. It's essential to comprehend which option is right for you to build an adequate life insurance plan.
Let's talk about why is term life insurance the best solution. Such policy is valid for a specified period, for example, 10 or 20 years. You can choose a suitable term, and in case of death during this period, your beneficiaries will receive the promised benefits. You can get a new policy or reassess your options at the end of the term. Term life insurance is the simplest and cheapest solution; sometimes, companies offer to buy it without a medical examination.
Permanent life insurance costs more than term contracts, but it provides additional options, for instance, a cash-value account that increases over time. You can apply for loans for the value of this account until the end of your days. Whole life insurance is the most popular type of permanent insurance service; it guarantees payments to heirs, regardless of the date of your death. If you want to invest part of your retirement savings profitably, leaving funds for other needs, it's the best insurance option.
How much coverage to buy?
The answer to this question depends on your financial obligations. The main expenses you must consider during the calculation are:
- Outstanding debts, including mortgage and personal loans.
- Everyday living expenses, such as childcare. Paying utility bills, buying food, vehicle insurance, etc.
- Future costs, for example, buying a house or studying at a university.
Some people take out insurance at work, but we advise you to buy a personal policy in addition to the one offered by the employer. Remember that a policy at work may not be enough to cover all your family's financial needs. Besides, it can end when you leave the job.
Life insurance costs
Nowadays, you can find relatively affordable life insurance. Thus, a 40-year-old man in good health pays an average of $27 a month for a 20-year term policy with $500,000 in coverage; the study was carried out by a brokerage company Quotacy. Rates can vary significantly from supplier to supplier. The client's rate amount depends on his state of health, lifestyle, driving experience, etc. Some insurance companies are more loyal to customers, while others set strict requirements; comparing quotes from different insurance organizations is essential.
Where you can buy life insurance
There are several options where to purchase a life insurance policy:
- Directly from the insurer. If you have already identified the provider with the best quotes, you can contact him directly.
- Through an agent or broker. Many people want to consult before choosing a policy. The agent or broker will talk about the options available, help find a policy that fits the client's budget and inform him what documents he needs to collect for the policy.
- Compare rates. Most insurers publish their quotes on the Internet, which allows you to find the best coverage at a reasonable price.
When evaluating a company for whole life or term insurance, consider the following factors:
- Financial strength ratings. This indicator determines whether the company will be able to pay claims in the future. You can check financial stability through reputable rating agencies, for example, AM Best or Standard & Poor's. It is desirable to choose insurers with a rating of at least B+.
- Complaint ratios. Anyone wants to deal that delivers the highest level of customer service. Experts recommend giving preference to companies that have fewer complaints to state regulators.
- Types of policies. Not all organizations offer the same policies; some insurers focus on narrower products, such as child insurance.
If you want to reduce the choice, decide what you need: whole life or term life insurance before comparing quotes.
Comparing life insurance quotes
It is worth comparing quotes from different companies before buying an insurance policy to avoid mistakes. It's helpful to analyze coverage with the same level of coverage and find out what additional free services are present.
Life insurance companies often provide various quotes for premiums monthly, quarterly, semiannually, or annually. There are additional fees for monthly payments, which makes annual payments more profitable.
It's important to remember that the quotes presented on the Internet are approximate and usually differ from the final cost of the policy. Specialists will announce the exact price after submitting the documents and passing the medical examination.
When concluding a contract, it is necessary to indicate only reliable information; otherwise, the insurer may refuse to pay benefits to beneficiaries, referring to your lie.
How to apply for life insurance
Before applying, you need to collect all the specified documents. Most likely, you will be asked to provide detailed information about your current health status and family members' medical histories.
When choosing beneficiaries, know their details and social security number. You may need to answer questions about a criminal record, or traffic violations, especially if this has happened within the last few years. Some insurers offer instant coverage; it takes effect on the same day.