3 Tips for Buying Life Insurance

Insurance plays a crucial role in a family’s financial planning. However, understanding insurance before purchasing the product can be confusing. This is because there are a variety of products from term life to whole life insurance, filled with convertibility clauses and riders. Making the best choice is not always cut and dry. However, there are three effective tips that every family should know before buying life insurance. These include:

Understanding Why You Need Insurance

Many families understand that life insurance is beneficial to their financial security, whenever there is the death of a parent or spouse. Life insurance offers protection to help the family pay for a college education, mortgages, retirement fund, or monthly bills.

If the family is dependent on the income from a parent for ongoing support, they need to choose a beneficial life insurance policy. Even families that do not have immediate needs often consider a “starter” policy. This is because the monthly premium of the insurance policy is much less when you are young.

Understanding What You Need

Life insurance will pay out a lump sum benefit at the death of the insured. Financial planners will often calculate the amount of coverage a typical family will require. However, multiplying the annual salary of the household by eight is usually a good rule of thumb.

For a more detailed analysis, simply add up all of the expenses paid out every month. In addition, include all one-time expenses that will be incurred upon the death including funeral and burial costs. Take into account ongoing expenses including monthly bills, the mortgage, and school expenses. Finally, take the total of this number and divide it by 0.07%. This amount represents the total amount of the life insurance policy needed to generate approximately 7% every year to pay all of the families expenses.

Term Insurance vs. Permanent Insurance

Once your family has a firm understanding of exactly how much insurance you need, you will be offered two different basic options – term insurance and permanent (whole) insurance. Term insurance costs significantly less over the life of the policy. This is because this type of insurance is usually renewable and often comes with convertibility clauses to make changes in the future. Usually, if you are healthy, it is pretty easy to find cheap term life insurance to protect your family.

Alternatively, permanent (whole) insurance is usually more expensive because it maintains a monetary value that grows over time. The funds in a whole life policy can be borrowed against or cashed out before death. There are specific situations where one type of policy will be significantly more advantageous over the other, based on your family’s circumstances.

Your family’s insurance planning does not need to be complicated. The policy should be based on your family needs and budget. Before signing anything, make sure you understand the details of the contract and policy.

Should I Consider No Medical Exam Life Insurance?

Traditional life insurance carriers rely heavily on medical examinations in order to determine who qualifies for coverage and the rates charged. Examinations are unnecessary with no exam life insurance policies. The rates are based on other factors and are often higher than normal. No medical exam life insurance has several advantages and disadvantages depending on the person applying for the policy.

No medical exam life insurance is often the most attractive option for people who currently have some type of health issue. The issue needs to be serious such as cancer. Medical conditions that significantly increase the risk of death could cause some insurers to deny coverage. This type of life insurance does not require a full examination. This means that approval and the determination of rates are not affected by any existing conditions.

Individuals who are healthy and relatively young will want to avoid no medical exam life insurance policies. The primary drawback of these policies is that the premium is very high. This is because the insurer does not know the exact risk each policyholder presents. Even a person with a manageable condition like diabetes will often receive far better rates through a term life insurance policy that includes a full medical examination.

People who have existing medical conditions that make moving difficult will want to explore these no medical exam life insurance policies. The lack of a medical examination means that there is no need to travel a long distance to a hospital or to endure long periods waiting uncomfortably. This can also reduce the initial cost of acquiring the insurance since no exam fees need to be paid.

It is important to note that carriers offering no medical exam life insurance do consider several other factors when calculating rates. Demographic information such as age and gender are considered. Employment and potentially risky hobbies will affect rates as well. Any person who can easily pass a medical examination without risk of being denied coverage will want to avoid this type of life insurance in order to get the best rates possible.

Shopping For Term Life Insurance

term life insuranceResearch and comparison shopping is so important when it comes to purchasing any kind of insurance. Most consumers like to devote their attention to buying life insurance just once in their lifetime and move along with other forms of responsible purchases. Knowing the differences between whole life, term life, variable life or even universal life insurance policies can all be very confusing and will require some forms of research. Before looking for term life insurance rates, one needs to determine just how much coverage might be required. This will depend on each consumer’s needs and wants. The needs could change from year to year or every five to ten years depending on the individual’s age at the time of purchase. One of the best ways to figure out just how much coverage is needed would be to meet several agents to see what each company can offer. This would also be the ideal time to determine which kind of policy would be well suited for the individual at this present time!

As with most insurance policies, the best time to invest in this would be when the individual is in excellent health and young enough to receive the lowest rates. Although most consumer’s in their early twenties are not thinking about purchasing any kind of life insurance, this would be the ideal time to lock in their extremely low rates! This is when term life insurance can come in handy for consumers that want some sort of coverage for a limited period of time. With all the great resources located within the internet, it is so easy to do some comparison shopping. Most insurance companies have very detailed information on their websites along with free quotes and direct access to agents who can answer any questions as well as administer and get the ball rolling very quickly! These seasoned professionals can come into the individual’s home, office or even meet up at the local coffee shop to discuss all the details.

The good news today is that there are many reputable organizations that will offer a guaranteed acceptance for term life insurance even if they aren’t in their early twenties with no medical exams! This makes it even easier for those whose preferences are needed immediately and for a specific duration. For example, a term life insurance policy can be structured for a period of five, ten, fifteen or even twenty years depending on the company as each will have their very own qualifiers. Consumers that are interested in being covered for a short period of time will benefit greatly from this form of life insurance. For example, if the individual wanted to get extra coverage during a specific timeframe due to unemployment or medical reasons. Many consumers prefer to bypass the necessary medical exams that are required for other policies like whole life.

Term Life Insurance for Seniors

Term life insurance is a financial product most often purchased by younger people who are seeking to financially protect their family early in life. As time passes, they expect that they will pay down their debts and their growing children will no longer rely on their support. However, as people begin to live longer and with the rising costs of medical treatments and other basic living expenses, many people are finding a need for term life insurance later in life.

Seniors who are raising a grandchild, having mortgage debt or working in retirement may have a definite need for life insurance for seniors. Paying for funeral costs, marrying late in life or retirement account losses may also create a need for life insurance. For those who find themselves in need of life insurance, the good news is that increasing life spans are driving down the costs of term life insurance, even for seniors.

Term life insurance plans designed for seniors generally have a term that is shorter than most term plans designed for younger adults. Most senior term plans commonly have either a five year or ten year term. When applying for coverage, a senior can expect the insurance company to require the completion of a health questionnaire. Additionally, some companies may require a senior to undergo a physical examination before issuing a policy. Insurance companies know that most seniors will not be in perfect health, but they want to avoid those with serious medical problems.

Seniors who do have a serious health problem may not qualify for a standard term life insurance plan. However, there are options to consider. Guaranteed issue term life plans are more expensive than standard plans, but almost everyone can qualify. These plans often have a waiting period of two to three years before the policy goes into full effect. However, the exact rules do vary somewhat depending on the issuing company.

Is Burial Insurance Necessary For Me?

burial-insuranceNearly everybody is aware of life insurance and its benefits. However, there is one type of life insurance that is not as well known to the average consumer. It is known as funeral insurance, final expense insurance, or most commonly, burial insurance.

In my professional life, there are generally two circumstances where the topic of burial insurance comes up. The first is when a client or prospect comes to me and their friend just purchased or heard about a final expense policy, and now they want to know if they should get one too. The second situation is when I’m meeting with a client and realizing that they probably lack the funds and/or insurance coverage to pay for their own funeral in the event of their demise.

Many people do not realize how much final expenses can tally up to. The average funeral service in the United States is over $10,000. Between a casket, burial plot, flowers, funeral home, transportation, etc., it is easy to see how costs can add up quickly.

This is where burial insurance comes in. Some people financially just cannot afford a larger term life insurance plan. What they often do not realize is they could qualify for a very inexpensive burial policy that will remove the financial burden of their funeral costs from their loved ones. Even some of the most financially strapped individuals I have met with, were able to pay for a policy and rest easy knowing their family was not going to have to scrape together the money to fund their final expenses.

In addition to removing the financial burden from loved ones, a burial policy can also allow an individual to plan out their final wishes. Once you know how much coverage you qualify for, you can meet with a funeral director to plan your funeral and burial based on the coverage you are allotted. Planning your funeral ahead of time lifts a huge burden from your loved ones in their time of mourning.

Although burial insurance is surely not for everyone, it definitely has a place for some people in their financial planning.

What is Medigap Insurance?

Medicare pays a great deal of the medical costs for its members, but it doesn’t cover absolutely everything. Medicare recipients have coverage for hospitalizations under what is called Medicare Part A. They also have insurance that covers doctor’s office visits and tests, and this portion is covered under Medicare Part B. However, both Medicare Part A and Part B have a deductible.Generally, Medicare will pay about 80 percent of the costs for members. The extra 20 percent will be charged to the patients as coinsurance or copayments. For example, when they visit their doctors, Medicare recipients may need to pay what is called a “copayment.” After the doctor’s office bills Medicare for services rendered, Medicare will pay its portion to the doctor’s office. If there is an amount left over for the patient to pay, the doctor’s office will then bill the patient for what is called the “coinsurance” amount.The Limitations of Medicare Coverage

Medicare also has a limit on how much it will contribute toward hospitalizations and hospice care. Once the limit has been reached, the patient will be responsible for the remainder of the bills. While Part A is in effect, the patients will be required to pay their coinsurance or copayment amounts. If Medicare recipients require a long stay in the hospital or a skilled nursing facility, their portion of the bills could amount to much more than they can afford to pay.

What Is Medigap Insurance?

medigap-insurance-plan-comparisonBecause Medicare can leave significant gaps in a member’s health insurance coverage, private insurance companies offer Medicare supplemental insurance plans available to people. These supplemental plans are called “Medigap plans,” and they cover the remaining 20 percent in varying degrees.

Medicare Supplemental Plan F is the most extensive plan and is the most popular. This plan covers 100 percent of the costs that are left over for Medicare recipients to pay, including Part A and Part B deductibles, Part A and Part B coinsurance and copayments, Part B excess charges and even a portion of the costs for emergency medical care received while traveling outside of the country.

Choosing and Purchasing a Medigap Plan

Because Plan F offers members the most coverage, it is also the most expensive. However, people who are interested in a Medigap plan have nine others to choose from that will help them cover their costs for a lower premium than Plan F would require of them. During the six-month enrollment period that begins the month that Americans turn 65, they may examine what the Medigap plans have to offer them and choose the one that most suits their needs.

Do You Have An Insurance Related Question?

Hello.

This new website of mine is dedicated to helping people navigate the sometimes treacherous world of insurance. I have worked in the insurance industry for the past 16 years. I have seen a lot in that time, both good and bad. I can see why and how the insurance industry sometimes gets a bad rap. As much regulation as there is out there, sometimes it just is not enough to stop those who want to use unethical means to generate a larger profit at the expense of their clients. There will always be loopholes, and as long as loopholes exist, there will always be those willing to jump through them.

What I hope to do is answer some of the common questions I have seen in my own practice and also take questions from the visitors of this site and answer them for the public to see. If you have an insurance related question, feel free to use this form to ask it.

Thank you, and I look forward to answering your questions.