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How to buy life insurance
Courtecy:
http://www.insurance.com
Buying life insurance is an easy way to protect your
family after you're gone. If you know what to look
for, you can get great coverage at a price you can
afford.
Why buy life insurance?
Topping the list of reasons to buy life insurance is
the financial protection life insurance offers. If
you're single and just starting out, you may not
need life insurance. But as you take on more
responsibilities and your family grows, your need
for life insurance increases. The proceeds from a
life insurance policy can replace the income lost to
your family upon your death. You might also want to
buy life insurance to pay off debts and expenses,
leave money to charity, and cover final and estate
expenses.
Choose term or cash value
There are two basic types of life insurance: term
life insurance, which provides life insurance
coverage for a specified period of time (the term),
and cash value (permanent) life insurance, which
combines a death benefit with a cash value
component. Cash value insurance offers lifetime
protection, while term insurance may be the most
affordable option if you're buying life insurance
mainly for the financial protection it offers, and
your need for life insurance is temporary (until
your children leave the nest, for instance). Some
term policies (called "convertible") will permit you
to exchange the term life insurance policy for a
permanent one at some point.
Decide how much coverage you'll need
The amount of life insurance protection you should
buy depends on how much income your survivors will
need, how much you own and owe, and the amount of
other life insurance available to you. If you're
married, both you and your spouse should consider
buying life insurance. One of the easiest ways to
estimate how much life insurance protection you
should buy is to use a life insurance needs
calculator.
Pick a number between 1 and 30
Term life insurance is usually offered for periods
ranging from 1 to 30 years. Consider choosing a term
that matches your need for life insurance
protection. For instance, if your main reason for
buying life insurance is to protect your 7-year-old
twins until they're out of college, you'll want to
buy a policy with a term of at least 15 years.
How much will it cost?
How much you pay for life insurance will depend on a
number of risk factors, including your age, your
health, whether you use tobacco, your family health
history, and the type and amount of life insurance
you're buying. Keep in mind that the premium you're
quoted initially will increase later. For instance,
when you buy term life insurance, rates are
guaranteed only until the end of the term (annually
for annual renewable term or at the end of a
specified number of years for level term). While
most life insurance policies can be renewed at the
end of the term, you'll pay a higher premium for
coverage.
Shop around
When comparing quotes for life insurance, make sure
that the insurance coverage you're comparing is
similar. And remember, any policy that you buy is
only as good as the company that issues it. Find out
what rating the company has received from major
ratings services, such as A. M. Best or Standard &
Poor's. These companies evaluate an insurer's
financial condition and claims-paying ability. The
company giving you a quote should provide you with
this information. You can also contact your state's
department of insurance to find out more about an
insurer's record.
Submit an application
Once you're ready to purchase a life insurance
policy, you'll fill out a life insurance application
that contains questions about your current and past
health history and lifestyle. You'll generally be
required to take a medical exam, arranged and paid
for by the insurance company. The answers you give
on your application, along with the results from the
medical exam and your past health history, will help
the insurance company determine whether to offer you
a policy, and if so, at what price.
Learn the lingo
Maybe a life insurance contract isn't as exciting as
a best-selling novel, but read it anyway. Policy
provisions, the amount of benefits, the premium, and
other charges you'll pay will be listed along with
other important information such as the
beneficiaries you've named and the premium guarantee
period. Make sure you understand everything in the
policy. Under the laws of your state, you may have a
"free look" period (typically at least 10 days)
during which time you can cancel the policy without
penalty.
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