The Life Insurance Policy and What You Need to Know Before You Buy

Are you looking to buy a life insurance policy? Well, be careful. Life insurance can be difficult to understand and it's easy to be conned into buying something under false pretenses.

Recently a prominent life insurance company together with several of its agents paid a huge fine because it permitted the sale of a life insurance policy disguised as a retirement plan. There was little attention given to what a life insurance policy is truly designed to provide.

Life insurance is not an investment for your benefit. It's guaranteed income tax-free cash paid to someone you designate in the event of your death. If you love someone and want to protect them, then buying a life insurance policy makes sense.

As primary bread winner in your family, your lost income could jeopardize the ability of those you love to continue to enjoy their standard of living.

The only way to guarantee an immediate replacement of this money is with the intelligent purchase of a life insurance policy.

Notice I didn't say term life insurance, low cost life insurance, or whole life insurance.

To your loved ones ... this doesn't really matter.

Over the years I've delivered millions of dollars of life insurance benefit to the families of deceased bread winners. And you know what?

No one ever asked me what type of life insurance policy it was. They were just extremely grateful to get the money.

Term is the cheapest, but it's unlikely the death benefit will be paid since the life insurance policy will probably lapse before you actually die. Right now the premium may seem cheap compared with other types. But what happens when you're older?

Term life insurance premiums can be level for a specific number of years, but when that number of years is up the price will skyrocket to the point you won't be able or willing to pay.

Whole life insurance provides a lifetime level premium until the policy is paid-up. This can be 10 years, 20 years ... or when you reach age 65, 85 or 100. One big advantage is you don't have to worry about your policy expiring before you do.

One type of life insurance policy is not necessarily better than another. But it's critical you understand what you are buying, how it works and your net cost.

After all, if the policy isn't in force when you die you have thrown your premium dollars right down a rat hole.

By the way, don't fall for that line about buy term and invest the difference. Anyone who cons you with this bunch of malarkey has absolutely no idea how to intelligently evaluate the purchase of life insurance.

An excellent life insurance policy to consider is universal life. This guarantees the death benefit up to age 115 regardless of the performance of the underlying investment.

Although more expensive then term life insurance, universal life is far less costly than a typical whole life insurance policy. But be careful because some universal life policies are sold by focusing on projected interest rates rather than contractual guarantees.

If you are considering the purchase of a whole life insurance policy from a mutual company that declares annual dividends, ask the agent for a hypothetical illustration using a dividend forecast at least one percent less than the current rate.

In the past, when long-term interest rates were higher, mutual companies credited very handsome dividends to their policies. But today with long-term rates still depressed, it's unlikely a life insurance policy will perform as illustrated.

In summary, pay close attention to the guarantees of whatever life insurance policy you decide to buy. Also, make sure you know the credit rating of the life insurance company.

There is nothing wrong with term life insurance, but understand your options about converting to a permanent plan. This could be critical if you become uninsurable before the policy expires.

Don Adams is a 24 year veteran financial consultant who provides easy to understand personal finance advice on a wide variety of money matters.

---

What Is Homeowners Insurance Coverage?

Before attempting to find the best homeowners insurance coverage you... Read More

How To Save Money On Your Homeowners Insurance?

In order to save money on your homeowners insurance you... Read More

New Concepts in Car Insurance - Pay as You Drive

You can pay as you talk with a cell phone... Read More

Disability Income Insurance Can Meet All Your Financial Needs

Disability income insurance can cover you in the event of... Read More

Internet Insurance Leads

It is a fact that more and more people everyday... Read More

Gain An Advantage Over Your Competition By Controlling The Cost Of Your Health Insurance

As many of us expect, the New Year will bring... Read More

5 Steps To Cheap Car Insurance Premiums

Although car insurance is compulsory, it's not necessary to pay... Read More

Life Insurance Settlement

A new financial tool is now available for senior citizens.... Read More

High Deductible Health Insurance Plans For Individuals and Families

Do you pay more attention to your car than your... Read More

Insurance and The Engineer

The world is no longer right when the two words,... Read More

Cheap Health Insurance - Health Insurance for The Self Employed

If you're self employed, you may think of health insurance... Read More

Discount Auto Insurance - Get Low Rates And Superior Coverage

Auto insurance rates can be quite expensive. If you are... Read More

Life Insurance Careers

Do you like to spend all day being sitting around?... Read More

What Is Permanent Life Insurance?

Unlike term life insurance, permanent insurance policies such as universal... Read More

How to Shop for Individual Health Insurance

If you find yourself in the position of shopping for... Read More

Health Insurance 101 for Individuals and Families

The changing healthcare and health insurance landscape in the United... Read More

Insurance in Northern Ireland: Historic Difficulties

No doubt most readers will have heard of the Northern... Read More

Life Insurance: Why Theres No Need to be a Desperate Housewife

Life insurance looks set to make a comeback in the... Read More

Are Accidents More Likely To Occur Closer To Home?

If you are going to be involved in an accident,... Read More

Health Savings Account (HSA): What Happens to it When I Retire?

The Health Savings Account (HSA) is a great tool that... Read More

Avoiding The Potholes Of Car Insurance

Car Insurance is an issue that we all of face... Read More

Medical Bankrupticies: What You Can Do To Protect Yourself

First the bad news: about 2,000,000 personal bankruptcies each year... Read More

Health Savings Account (HSA): Do I Lose It At the End of Each Year?

The Health Savings Account (HSA) is an amazing tool to... Read More

Types of Life Insurance

There are different types of life insurance policies available. Shop... Read More

Terrorism Insurance - What it Costs Small Business

The Terrorism Insurance Act of Nov. 26, 2002. This helps... Read More

Choosing Affordable Health Insurance For Children

In most cases, private health insurance comes through a person's... Read More

Health Insurance Providers Online - Benefits to Applying Online

Health insurance providers are going online to find new customers.... Read More

Are You Running the Risk of an Uninsured Business? Beware & Get Business Insurance

Human life is precarious and so are the activities they... Read More

Compare Car Insurance Companies Before You Commit

If you want to save money on your car insurance,... Read More

State Farm Auto Insurance ? Heres A Few Factors That Determine Your Rate

There are many factors that affect the insurance rate you... Read More

Millions of Americans have No Life Insurance

Only 61% of adult Americans have life insurance (down from... Read More

Tips For Lowering Your Auto Insurance Quote

Do you have many claims? If so, you should do... Read More

The Life Insurance Quote Business is Booming, but is the Insurance Quote Accurate?

The life insurance quote business online is booming. Not only... Read More