It is common knowledge that the average U.S. household is not prepared for retirement, let alone a tragic and untimely death in the family. Most financial planners recommend life insurance as the best form of income replacement to ensure a family can maintain financial stability. Unfortunately, recent studies have shown that, although 93% of Americans say that life insurance is something most people need, only 41% actually own a policy outside of their corporate benefits package.
Researching policies, companies and rates can make the process of buying term life insurance fairly simple and easy. Before deciding to buy term life insurance, you should decide on how long you will need life insurance coverage, how much you will need (your death benefit payout), which type of policy is best for your family?s needs, and which insurance company can provide it. After determining those details, the company will require that you complete a detailed application, provide documentation and undergo a medical examination before your policy will be issued.
Sounds like a lot to do, right? The ?unknown? is always scary, but like we?ve all learned from past experiences, putting in the effort and time to research empowers you to make the best decisions.
Choosing A Death Benefit
Some financial advisors and/or insurance agents will recommend a policy limit that is between 5 and 10 times your annual income. A blanket statement like that is never the right way to approach an important, long-term financial decision for your family.
First, individuals with no financial dependents may need only enough coverage to payoff funeral/burial expenses and student loans. Meanwhile, those with large families and heavy financial obligations may need much more than 10 times their income to cover living expenses, such as mortgage payments, credit card bills, college tuition, and other liabilities.
When calculating the amount of life insurance to buy, be sure to include current assets such as checking and savings accounts, pensions, private portfolios, investment properties and survivor's benefits. Existing assets can reduce the amount of coverage you need to buy, and will get you cheaper premiums.
Selecting A Term Period
Financial obligations change over time, so it is important to select a term which is appropriate to your particular circumstances and financial resources. Young people with growing families should consider 20 or even 30-year terms in order to lock in the lowest rates possible while they are young and healthy. Additionally, 20 to 30 years will offer enough time to cover the financial needs of children until they leave home and are financially independent/secure. Older people may choose shorter terms to cover final expenses and outstanding debts, or to leave a gift for surviving family members.
Either way, the term period can be customized according to your needs and wants when you buy term life insurance. When comparing life insurance quotes, this may be one policy option consumers can adjust to see how it affects their premiums.
Finding The Best Term Life Insurance Company
Which company and type of policy is right for you will depend partly on the cost of the coverage and partly on the reputation of the life insurance company. Since term life insurance is intended to cover your family for years ? anywhere between 1 to 30 years -, it is crucial to choose an established, financially solvent carrier providing good customer service and a reputation for prompt payouts. The cost of premiums should always be a consideration, of course, but it is important to compare the terms of the policies as well as the prices. The goal, at the end of the day, is value ? to get the best term policy at the cheapest rates.
Completing The Application
The term life insurance?application will contain detailed questions about your age, health, medical history, occupation, lifestyle habits and the like. The company will request documentation such as medical records, including any recent hospitalizations and medical exams, as well as driving records and credit reports. Your birth certificate and other documentation may also be required. Having the proper documentation ready in advance will save time in processing your application and help you to avoid any extra inconvenience or costs.
Tell The Truth
If you buy life insurance in the future, always make sure the information on an application is completely true and accurate, since failure to provide the correct personal information can result in having your application declined. If the application contains incorrect information and the policy is approved, the company can cancel the policy if and when this is discovered. If the erroneous information is revealed after a claim for the death benefit is made, the company can deny coverage, leaving your family without necessary financial support.
Do you have any personal experiences that would help future consumers choose the right policy for their family?