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.

---

Term Or Whole Life Insurance - Which Is Right For You?

One of the most important things you will ever do... Read More

Life Insurance No Medical Exam - Is It Really Possible?

Quite often you feel that an ad for life insurance... Read More

10 Tips to Save on Healthcare Insurance

Americans shopping for their own healthcare insurance can substantially cut... Read More

How To Save Money On Your Homeowners Insurance?

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

Auto Insurance In Texas

If you are looking for auto insurance in texas, you... Read More

Choosing Long-Term Care Insurance

A little over sixty percent of the folks who reach... Read More

Insurance For All Your Gadgets

Personalisation, Digitalisation, Mobilisation, these 3 words represent your life today.... Read More

Life Insurance: Who Needs It And How Much Do You Need?

Your friendly, neighborhood life insurance agent is most likely to... Read More

What You Need to Know About Auto Insurance

Let's be realistic, everyone needs to have auto insurance. Aside... Read More

Useful Tips on Reducing Insurance Costs

Most people want lower insurance costs but are often too... Read More

The Ups and Downs of Temporary Health Insurance

If you're a recent college graduate, or in between jobs,... Read More

Finding Term Life Insurance Online

What exactly is Term Life Insurance?Term life is a form... Read More

Guide to Life Insurance Terms

Listed below is a useful guide to life insurance terms.... Read More

Life Insurance Providing Little Protection from Terrorism

Recent statements by the City of London Police Commissioner James... Read More

Can I Get Affordable Dental Care?

In the United States most companies offer their employees dental... Read More

What is Life Insurance?

Life Insurance is an insurance policy that provides an agreed... Read More

Health Savings Account (HSA): Helpful for Older People?

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

5 Steps To Cheap Car Insurance Premiums

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

Finding California High Risk Truck Insurance

California high risk truck insuranceIf your are in need of... Read More

Life Insurance, the Universe, and Everything

You may have noticed that life insurance is coming back... Read More

UK Young Driver Motor Insurance - Build Your Own No Claims Bonus or Insure through Your Parents

For may young drivers, affording the costs of motor insurance... Read More

All Auto Insurance is Not Created Equal!

Contrary to what you may have heard all auto insurance... Read More

Why Should You Purchase Your Auto Insurance Online?

If you're interested in slashing your auto insurance bill in... 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

UK House Insurance - The Risk of Under-insurance

For many years in the UK, motor insurance has been... Read More

The Great Value Of Accident Photographs

You were humming along on a bright and sunny day... Read More

Basic Coverage of Homeowner Insurance Policies

The insurance policy is a package that includes more than... Read More

Bankers Long Term Care Insurance

How many times have you seen people whose life was... Read More

Life Insurance Information

Life insurance is a personal insurance plan designed to pay... Read More

Cheap Car Insurance

Finding good car insurance can be very difficult. Here are... Read More

Types of Long Term Care Insurance

Regardless of what some people might think, medical insurance will... Read More

What Are The Auto Liability Insurance State Minimums For My State?

As you shop online for the best auto insurance deals... Read More

Life Settlement: Towards A Free Market for Life Insurance

The Life Settlement market is all about providing due access... Read More