Guide for Buying Life Insurance
One of the most vital parts of financial planning is Insurance. It is not an easy task to understand the concepts of life insurance as one need to be aware of all the insurance terms and details. There are various terms and concepts related to insurance like sales representative, loan, broker, insurance advisor and many more. Most of us who are not aware of the insurance concepts rely on insurance advisor and others, who are well aware about insurance. Not every one of them trusts and believes the insurance advisors / insurance sales representatives due to certain reasons. In many instances people end up paying a huge amount with wrong insurance policies. It is very important that one has to be aware of all the concepts before buying insurance.
This article will make you aware about few ideas before getting insurance;
Decide on the amount of life insurance you should buy: It is always important that you consider the amount of life insurance you will need. Make sure that the policy which you buy should be relevant and should cater to all your needs. It should not even be insufficient in future.
Decide on the kind of insurance you need: There are innumerable insurance policies available for various things. You need to decide on what type of an insurance policy you would like to prefer. This would further help you know the precise nature of every policy.
Compare the costs: Ensure that you do a detailed research and compare the cost of all the similar policies and their contents. Doing so will give you an idea about the price change in every policy.
Understanding financial needs: You can understand your financial needs better than anyone. Avoid seeking advice from others and instead think by yourself and decide on how much protection you need. Also plan a rough sketch of your insurance needs keeping in mind about the debt, income replacement and funeral costs. Planning your financial needs will give you a clear picture about which type of policy to go for.
Decide if you need term insurance or permanent insurance: It is very important that you know the difference between the term insurance and the permanent insurance before opting for an insurance policy. A Term insurance policy will help you cover maximum of your debts and other financial requirements. Doing this will prevent you from buying a life term policy. Decide by yourself rather than seeking the insurance sales representative’s help. Since various insurance companies like to make a major profit out of their life term policies you need decide if you really need it based on your needs. Term insurance policy can be renewed and can be changed with the use of a convertibility clause. Also there is another form of insurance; i.e. endowment insurance. In an endowment insurance policy, the policyholder is paid an income and if the policyholder is to die, the death benefit would be paid to the beneficiary.
Decide about the amount: One of the techniques to select the perfect policy according to your need sis to plan a sketch about how much money you will be investing based on your income and how much can you afford. Different companies have different insurance rates, which you should do a research on. Any good research company with decent sales representatives will be willing to help you with the decision. You can compare the prices from various insurance companies, libraries or agents.
Try for a low cost policy: Once you have done your research and are aware of your requirements, look for a good buy with the best of price. Using the two types of index numbers as an insurance policy aid will help you get the best of policies. The two types of indexes are known as the Net Payment Cost Index and the Surrender Cost Index. Using these indexes will make you choose the right price.
Decide twice before taking up the policy: If your insurance agent is successful in convincing you and you are ready to buy the policy, stop right there and think twice before buying it. Is advisable that you take some time to think on the kind of policy you would like to go for rather than just listening to your agent. Researching is one of the best options.
Seek the help of an independent broker: Since a broker is independent and does not work for someone, he will have all the relevant and pros and cons of each and every policy. It is better that you seek his help to know the advantages, disadvantages and the comparison of prices.
Insurance for protection and not investment: You should always keep in mind that seeking insurance is for your family’s protection and not for your investment. There are various policies which provide both insurance and are also expensive. Avoid buying expensive policies and investing the amount in them, instead save the rest of the money by just paying the term insurance.
Be aware of the advisors payment: At the time of insurance buying, you should be aware of the buyer’s payment from your deal. Find out if the buyer is paid through the commission or fee. Look for other alternatives in case of a commission involved. If there is a presence of a commission, the advisor will have a conflict of interest.
Questioning: It is very important that you develop the habit of questioning to your advisor and ask questions like the terms of the policy, the benefits, the validity and many such factors.
Also read:
Things To Consider When You Are Reviewing Homeowner’s Insurance
