Here's What You Should Look for in a Life Insurance Policy
Oct 10, 2019 18:54
You should invest in a lot of important types of insurance over the course of your life. You won't be able to drive a car (legally, anyway) without car insurance, and you’ll want to get homeowners insurance when you buy a home (or renter’s insurance when you rent).
And, as you grow older and build your personal and professional life, you'll almost definitely want to invest in life insurance, too. Below, you can learn what to look for in a great life insurance policy and how you can go about using it to your advantage.
How life insurance works
Life insurance is a bit different from other forms of insurance. It pays out when you die, which — unlike a fender-bender or a house fire — is guaranteed to happen someday. That means a lifetime policy will always pay out. There are also term life insurance policies, which cover you only for a set period of time, like 20 years.
Until then, you'll pay a regular premium to keep your life insurance current. Life insurance can be particularly important in the event that you pass away unexpectedly. If your family relies on you for income and you die young, the life insurance payout can be a financial salvation during a traumatic and uncertain time for your survivors. Later on, your life insurance may be something that you "settle", or sell for cash.
All else being equal, a lower premium is always better. While you certainly don't want to accept lousy insurance in order to save a buck or two, you should try to maximize the cost-effectiveness of your policy.
And it's particularly important to emphasize affordability in the case of life insurance. That's because you’ll pay into it regularly for the term of the policy — or else allow your policy to lapse, in which case your coverage will end and you won't get any money back. You can compare life insurance costs by getting more than one life insurance quote from a broker online or in person.
The money from an insurance payout can make a huge difference to your loved ones in the event of your death. But it will only be useful once they get their hands on it, and delayed payments can be an absolute nightmare during an already stressful time for your family and their finances.
So while you're shopping for life insurance, check for immediate payouts. If you work with a broker, emphasize this and ask for their honest experience with the policies you're considering.
Life insurance only helps your loved ones after you pass away — at least, that's the traditional concept. But modern life insurance companies are getting more creative about how they design their policies, and they've sometimes sweeten the deal with "living benefits". Living benefits are exactly what they sound like: perks that you get from your life insurance during your life.
Selling your policy
No matter how great your life insurance policy is, you may someday choose to sell it. Life insurance is a vital protection when you're a part of a young family, because the expenses associated with your death and the loss of your income could be staggering.
But if you live happily and healthily to a ripe old age, your life insurance payout won't be as necessary. Plus, you may have other uses for that cash: you may need it to pay off medical bills or may just want to spend it while you still can. In cases like these, you may want to sell your life insurance policy.
And you can do just that through a broker or by contacting a life insurance provider directly. "Life settlements" swap life insurance coverage for cash; you'll get a lump sum payment, the buyer will take over your premiums, and the buyer will collect the insurance payout when you pass away.
Viatical settlements are a different sort of settlement available only to those with relatively short life expectancies and certain health conditions. Those types of settlements are tax-advantaged. If and when the day comes that you want to sell your life insurance, you may be able to do so — drawing one more benefit out of a great policy! Compare life insurance with iSelect.