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Life Insurance Buying Tips

Most people are perplexed when buying life insurance as they find it difficult to determine what type of life insurance policy to opt for and what should be the insured amount. There are others who fail to understand the importance of owning life insurance and are either under-insured or not at all.

Author: Saranya

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Although it is advisable that all individuals should own life insurance policies – it becomes increasingly important, if you have family members who are abjectly dependent on you for financial support and they may not have any other means of livelihood. Older couples also may need life insurance to protect a surviving spouse against the possibility of death. Again, individuals with large assets will need life insurance to help reduce the impact of estate taxes when passing on wealth to their heirs.

There are various types of life insurance and you should understand the merits and demerits of each type before finally deciding which type of life insurance will be most appropriate for you.

• Term Insurance is the widely bought and least expensive form of life insurance for people below 50 years. A term policy is valid for a specific period of time – may be up to 10 years, and subject to renewal at the expiry of the period.

• Declining Balance Term Insurance is mostly viewed as mortgage insurance since it can be written to match the amortization of your mortgage principal. Once the mortgage is fully settled, the insurance becomes superfluous and the policy expires. Benefits are obviously paid only if you die during the tenure of the policy.

• Whole Life Insurance offers permanent protection and has a built-in savings component. Part of that premium that you pay accrues as cash savings. As the policy appreciates, you may be able to borrow up to 90% of your policy's cash savings tax-free.

• Universal Life Insurance is mostly similar to whole life insurance but with potentially higher earnings on the savings component. Universal life policies are favored for their flexibility with regard to premiums and face value. Premiums can be increased, decreased or even deferred and cash values can be withdrawn.

• Variable Life Insurance means fixed premiums and better control over the cash savings. Your cash saving is invested in stock, bond, or money market funding – in consultation with you. Because of the speculative nature of investment, the cash values as well as death benefits can fluctuate.

There are also certain other types of less bought life insurance policies such as Universal/Variable combined, Survivorship life insurance, First-to-die life insurance etc.

Another nagging question is – how much should be the face value of the life insurance policy you buy. One method is to buy life insurance based on the concept of income replacement and in that case, the norm is you buy between five to ten times of your present annual salary. The other method is to purchase insurance after calculating your individual needs and preferences.

Buying the right life insurance policy entails quite a few factors like your personal lifestyle, your financial status, your current income, premium affordability, number of dependents etc. It is wise to consult an insurance professional who may be willing to offer you dispassionate advice for a small a fee. Once you are clear in your mind what life insurance policy to buy, then there are a plethora of reputed and reliable insurance companies to buy it from.

About Author

Sharma is a SEO copywriter for Health Insurance California. He has written many articles in various topics like Kaiser Insurance,Kaiser permanente, Anthem blue cross, Blue cross CA. To Visit Our Website http://www.forhealthplans.com/. Contact him at forhealthplans.art@gmail.com

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