As our client base has evolved over the years and become broader we have been surprised by how often our younger clients are under insured and our older clients are over insured.
As a full service financial advisor we are experts in the finding the right insurance products for our clients. Below is a primer on the basics of life insurance.
We would be happy to talk you through your insurance needs if you think you might be one of those clients who is under or over insured.
Choosing the right life insurance policy means striking a balance between what you’re able to pay today and what you want to leave your loved ones later down the line. And while price is a big factor, there are other important considerations to make when choosing the right policy for you.
1. Policy Type
Life insurance types typically fall into two broad categories: term and whole.
Term Life Insurance
Term life insurance offers coverage during a certain period of time - think five, 10, 15, 20+ years. During this time period, you pay a premium and your beneficiaries will receive a death benefit should you die. If the time period ends (and you do not convert or renew the policy), you stop paying the premium and you are no longer covered by the policy.
Whole Life Insurance
Considered more of an investment, whole life insurance covers you from the day you sign up until you die - there is no end date. Over time, your whole life insurance policy builds a cash value, which you can cash out or use as a loan once it’s reached the date of maturity.
Term life insurance is typically more affordable. For those who are just looking to make sure their children are covered until they go to college, going with a term life policy may be all they need. For others looking to make a serious investment and are able to pay more per month, whole life insurance could be beneficial. As you consider various life insurance policies, deciding which type of policy is right for your unique circumstances should be one of your first deciding factors.
2. Tailored Pricing
Life insurance policy prices will vary greatly, both based on policy type, the provider and your unique circumstances. As you’re comparing prices and shopping around, it’s important to look for a policy that takes into consideration a number of factors - your health, smoking habits, travel history and other habits or indicators. The more in-depth the policy gets, the more tailored it will be to you - meaning you could be getting deeper discounts for healthy lifestyle choices or positive habits. Policies that offer more generic or lenient vetting may make up for it with higher premiums.
Having an affordable policy is important for a number of reasons. The purpose of life insurance is to provide financial security for your loved ones after your passing. That shouldn’t mean, however, that you’re depriving aspects of your financial life today in order to maintain your policy. Find a policy that can fit well within your budget - even when times get tough.
When faced with financial turmoil (job loss, divorce, etc.), a life insurance policy may be one of the first things to go. Keeping it affordable from the start may help avoid this. Additionally, if you cancel or lapse on your policy, you may face an uphill battle getting another one - especially if your health has declined in any way.
4. Option to Convert Policy
Say you hit the final year or two of your term life insurance policy, but you’d like to keep it going. Some term life insurance policies offer a conversion feature, which allows you to convert the policy into a permanent one.
One major advantage of having this feature is that you avoid having to go back to the market place and start your policy search all over again. If it’s been 20 or 30 years since you initially bought your policy, you may have developed health conditions that could make it harder to obtain a new policy.
5. Living Benefits
It’s important to find a life insurance policy that can offer you certain benefits while you’re still living. Some policies allow you to take premiums already paid back out to cover medical expenses, care, cancer treatments, etc.
Remember that any funds you take back out of your policy will lessen the amount your beneficiaries receive. However, this option could save you and your loved ones from financial turmoil in the event you fall ill or become incapacitated.
You want to know your loved ones are going to be well-cared for in the event that you pass away unexpectedly. Taking the extra time now to look at your options and choose something that’s right for you can make a big difference in how your policy benefits you and your family later down the line. If you’re working with an agent or financial advisor, ask them to help you review your options thoroughly.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.