What should I consider when shopping for a life insurance policy?
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Asked May 8, 2011
There are a number of items that should be considered when you are shopping for a life insurance policy. You need to determine what type of policy you need, or whether you would be best served to take out more than one type. You'll also need to determine how life insurance to purchase without exceeding your personal budget. And then you should look at insurance companies themselves to find the one that is highly rated and offers rates that fit within your desired range.
Term life insurance is designed for situations where the insurance is used to guarantee that a monetary obligation is met. This could include such things as the home mortgage, making it possible for your children to have college tuition or simply setting aside the funds to allow your spouse to move back home to their family home. Whole life insurance is used to provide a lump payout to the beneficiary of your policy. One of the advantages of a whole life insurance policy is that they provide some financial flexibility for the owner of the policy while the insured person is still alive. It is not unusual for a person to have multiple life insurance policies of different types.
Next, determine how much insurance you need. For a term life policy, this amount is equal to the goal the policy will achieve. Whole life policies are a little different, especially when it will become the primary source of income for one or more family members. To calculate this type of policy, project your current household expenses at least 1 year in advance, then add in such things as your total mortgage, the expected cost of your final expenses, and the costs of any ongoing medical expenses for family members.
Finally, make sure you are taking out a long-term insurance policy with a company you can depend on. Insurance companies are rated on their financial stability by companies such as the A.M. Best company, and those ratings indicate how well the company is expected to handle the projected worst-case scenario for claims processing. Insuring with highly rated companies is considered to be a more secure investment because the company is less likely to become liquidated, voiding or limiting the value of your life insurance policy.
Answered May 8, 2011 by Anonymous