If you’re like most Americans, you aren’t very confident about what to ask for when shopping for life insurance. Besides the major questions like, “How much should I get?”, or “What kind of insurance is right for me?”, there are a few other things you ought to ask any company you’re considering for your insurance needs.
As with any insurance, it is very important to keep paperwork and/or company name available to your beneficiaries when the time arises. It is as simple as registering on a life insurance database to guarantee this information will never get lost and become a lost life insurance policy.
First, do some research on the company. How long has the company been in business? What are it’s fiscal ratings? What are their credentials for selling life insurance? Check with companies like Standard and Poor’s to search out their fiscal rating. When sussing out the insurance agent look for phrases like Chartered Life Underwriter, Chartered Financial Consultant and Certified Financial Planner. Also find out if the agent sells insurance from only one company or multiple agencies.
Ask about the basics of the policy: how long it lasts, what the premiums are going to be, rate of return and how the death benefit works. It it’s permanent insurance you’ll also want to know the kinds of benefits the policy gives while you’re living. Know who owns the policy, who’s providing funding for it, who decides the beneficiaries, how much the policyholder can take out of the policy and how fast, what the money can be used for and what the rules are for borrowing. Know the guaranteed numbers: how much the policy is worth and how much it pays out in the years ahead.
Also ask how the premium changes if your health changes, for better or worse. Additionally, some insurance policies provide benefits for policyholders who become disabled, even if they didn’t purchase a disability rider. Different providers have different definitions of what ‘disabled’ is. Knowing how a disability is defined and if your life insurance waives the premiums if there is a catastrophe will help you find the right policy for you and if you need to purchase a rider or riders to cover other situations. Ask also if the death benefit is adjusted for inflation. A large death benefit now may be whittled away by inflation over the years, leaving your beneficiaries with less than enough to pay off debt and continue their quality of life. The policy may allow you to buy more insurance later if necessary.
Know the facts about what happens if or when you can’t pay your premium. Is there a grace period? Permanent policyholders may even be able to take out an ‘automatic premium loan’ and borrow against the cash value of the policy to pay premiums if needed. As you get older your financial needs change with you. Reconsider converting a term policy to a permanent policy as you age: those premiums may jump by thousands of dollars. Asking about it now may save you considerable money down the road.
Finally, if you’re purchasing a permanent life insurance policy, expect it to be a long-term investment but ask about when it will start to make positive returns. Oftentimes it can take anywhere from 5 to 10 years before a policy sees positive returns on your investment.
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