5 Life Insurance Tips Every Customer Should be Aware of

Life insurance is considered essential in every part of the world. Old age, sickness, and sudden mishaps are situations where one finds himself and his family members subject to a financially burdensome situation. A tailored life insurance product can help prevent financial hardship in these situations.

Here are some life insurance tips that will help you choose a policy meeting your needs:

Term or whole life

The nature of the insurance is of foremost importance. Term life insurance and whole life insurance are two types of life insurance. The two types are unique and quite different from one another. It’s wise to study both types before choosing which coverage is best for you and your family or business.

Life Insurance Tips

To give you some insight, here is a short description of both types:

  1. Term life insurance: Term life insurance is time-bound. It provides insurance coverage for a fixed duration. If the insured dies during this time, the insurance policy pays. A drawback of term-life insurance is that it does not build cash value. Term policies are especially good for financial obligations that end, like a home mortgage. Permanent policies (whole life) are good for planning family needs or retirement. Ask your insurance provider to give you a proper explanation as to why he thinks one is better for you than the other.
  2. Whole life insurance: Whole life insurance covers you for your entire life. Whole life insurance builds permanent cash value. This type of insurance may cost higher initially or be level for the policy duration. Some whole life insurance contracts allow withdrawals or loans from the accumulated cash value. Another pro includes financial coverage for your entire life. Universal life and variable life insurance are among the subcategories of whole life insurance.

Take your time and choose a life insurance type that suits you best.

Beneficiary Choice:

In the majority of cases, the beneficiary chosen will be a named spouse or children of the insured or your estate.  But, perhaps you do not have dependents in mind.  In this case, you can name an organization or charity as your beneficiary.

Naming a beneficiary is a personal choice. You must satisfy certain requirements in order to be able to name a beneficiary. The requirements are similar everywhere, whether you purchase life insurance Rochester, NY or any other place.

If you die without naming someone as your beneficiary, generally the court system will advise and the benefits will be paid to heirs or to the insured’s estate. It is wise to designate a beneficiary on your policy if you want the process to be smooth and hassle-free for them. A secondary beneficiary can be named as well, in the event of the death of the primary beneficiary.

Understand the coverage

It’s important to understand what ‘is’ and ‘isn’t’ covered by the insurance policy. In general, insurance policies don’t pay out within a certain length of time in the event the policyholder does not disclose a pre-existing condition.Also, if a person carries an accidental death insurance rider, be aware of some exclusions in the rider.

Surprisingly, policyholders have been found to not be adequately educated in what and how their particular policy will pay. Talk to your agent to be sure of what type of life policy you need and for what duration.

Purchase options and riders

Some traditional life insurance policies offer additional purchase options. Purchase options are not free. These options yield additional benefits but come with additional costs. The clauses that let you avail purchase options are called riders. Some riders allow the insured to gain access to a range of financial perks before he passes away. There are other riders offered on some policies that may enable you to pay for long-term care expenses using the cash value of your policy. Talk to your agent about available riders.

Health questions are inevitable

When buying most types of life insurance, health questions are inevitable. Providers need information regarding your health for two reasons:

  1. They need to make sure you are a good risk depending on the policy type. A person with a terminal illness applying for life insurance obviously would not be approved for coverage. Sometimes people with certain health conditions will be rated by the insurer, which means they will be covered, but at a higher premium.
  1. Providers will decide which policy to offer based on the health condition of the insured. Not only the policy, but the premium is also based on the insured’s health. Hence, be sure to provide your insurance company with all information related to your health.

Providing false information puts you at risk of policy cancellation and stops your beneficiaries from accessing benefits in case of your death.

Summing up

Choosing life insurance is an important decision. Make sure you choose the right policy. Educate yourself with the information above to help you make your decision and choose the correct coverage.

About Tina Roth

Get to Know Me Better. Hi, I'm TINA! I am a financial planner, blogger, and freelance writer and digital marketing consultant. The idea of starting a finance blog has been hitting me for long; I took it seriously after falling into a spiral of finance debacles and recovering from it. Here I write about personal finance and money management tips.

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