Seven Mistakes to Avoid when Choosing Life Insurance

Choosing life insurance can be an onerous task. It doesn’t just make you think about all the bad things that could happen to you and your family, it makes you think about it in detail. On top of that, you then have to decide what type of insurance you need, what level of cover is best, and which insurance provider to go for.

It can be enough to put you off altogether. But, try not to be discouraged. Here are a few guidelines on what not to do. After all, once you know what not to do, the rest should fall into place!

Don’t settle

As we said, it can be easy to get discouraged when you are looking for life insurance. There are so many options, so many insurance providers and so many insurance products. Wading through them can seem like a huge task. However, it’s never a good idea to settle. Don’t just go for the first half-decent option, just so you can stop looking. Taking some extra time should mean you get life insurance that actually suits you – and at a better price. If you’re hung up on where to start, you can begin with a quote from mainstream providers.

Don’t be uninformed

Knowledge is power, as they say. Knowledge is also the key to finding the best life insurance. Do some research to find out what type of life insurance products are out there, and try to find out more about each insurer. This should help you to find a product that suits you, any extras that need to be added on, with an insurer that is professional and offers the kind of service that benefits you.

Don’t be pushed

Once you know what you want, you will also know what you don’t want. While some insurers may try to convince you to buy certain products or extras, it may be the case that you don’t actually need them. As long as you know what you need, you won’t waste money on anything you don’t need.

Don’t be put off by prices

When you find out the price of the policy you’re interested in, there can be a certain amount of ‘sticker shock’. Try not to be put off by prices. As long as you take the time to find out what level of cover you need, as well as what’s on offer, then you know you will be getting the best deal for the type of cover that suits you. And remember, life insurance offers valuable protection – it’s not really something you want to scrimp on.

Don’t let someone else fill in the forms

There is often one person in the household that deals with the finances and paperwork. However, you must make sure that you are the one who answers any questions about you, when life insurance applications and paperwork are being completed. However well you and your partner know each other, it’s still possible that incorrect information could be given. This could lead to a void policy, or a claim being denied.

Don’t undervalue non-working partners

Non-working partners and partners that work part-time are often undervalued on life insurance policies. Often, we only pay attention to the actual paychecks that come into the household, and forget about all the work that goes on around the house. However, if you think how much it would cost if an outside party was brought in to do those tasks, the costs would really add up.

Don’t just forget about it

Unfortunately, you can’t just forget about your policy once you have purchased it. It’s more than likely that your life insurance will need to be updated over the years. Try to have a look over your policy every year or so, or when there is a life-changing event in your family. Update your policy as required, to be sure you are still covered for any lifestyle changes.

source: bripblap.com

How Safe is Your Life Insurance Company?

Dear Insurance Adviser,
What should I do with a single-premium life insurance policy that originated in the 1980s? The interest on the lump sum I put in is better than I would get from money market funds or certificates of deposit, but I have concerns about the viability of the company. How can I find out if my money is safe? How can I learn about the health of the company? I am 77 years old and would like to leave the money where it is, but as I age, I have concerns. Thanks for your advice.
-- Singly Worried



Dear Singly,
Nothing helps with anxiety better than a few facts.

First, find out if your state has an insurance guaranty fund. Most states do. In the event that an insurance company fails and is declared insolvent, policyholders with claims against the insurer can collect from the state guaranty fund.

If your state has such a fund, make sure its caps on claims are high enough to cover both your maximum life insurance benefit and the cash value of your policy. Even if the limits are high enough, collecting from these funds is a painful and long, drawn-out process. It would probably take at least a year to get your money.

Second, go to the A.M. Best Co. website to look up the Financial Strength Rating for your life insurance company. A.M. Best has been rating insurance companies for more than 100 years and is considered the gold standard. Click on the link for consumers to check on insurance company ratings, and put in your company's name. If your company is rated A, A+, or A++, it's on solid ground. If your company is rated B or worse, pack your bags, and head for the hills!

I have a question for you: Do you still need life insurance protection? It sounds as though you are interested primarily in the investment part of the policy. You mentioned that your interest rate is better than you can get elsewhere. But that's misleading if you don't need life insurance. The annual "mortality and expense charges" for the life insurance need to be deducted from your interest earnings in order to measure your true return. Mortality charges for a 77-year-old would be quite large and would significantly reduce the earnings on your policy.

If you do need life insurance still, perhaps you don't need as much as you have. Most life insurance companies with single-premium policies will allow you to reduce your death benefit and still keep the policy and interest rate. With a lower death benefit, the mortality charges being deducted from your earnings would be much smaller, so your earnings would improve significantly. I recommend that you talk to a financial adviser to help you with this decision.

Good luck. I hope this helps.

source: foxbusiness.com