What Everyone Should Know about Life Insurance – Courtesy of Nine Year Mortgage
Nine Year Mortgage believes that life insurance is an essential protection to have, especially for married people with children. When a primary wage earner is taken in death, serious decisions and consequences arise, such as whether to sell the house, whether a stay at home Mom should go to work, whether a grandparent should move in to take care of kids, and mourning the loss of the spouse/parent. These issues, along with all the rest that go along with such a stressful time in life, are best made with the peace of mind that comes from knowing that money is not a problem or a factor in the decision.
Below you’ll find a “top ten” list of basics points to consider regarding life insurance.
Nine Year Mortgage Life Insurance 101
1. All policies fall into one of two camps.
There are term policies, which are simply insurance coverage, with no investment component. These policies are “rented”, in that they will expire at some point, and no equity is built up. Unless you die, there will never be a benefit to a term policy.
There are also many variants of whole life, which combine an investment product with permanent insurance and build up cash savings which are owned for life. This type of policy has a “cash value” that is separate from the death benefit.
Younger people usually buy term insurance, which can have a level premium for as long as 30 years. Term insurance greatly reduces costs, but creates no ownership, and will expire.
2. Insurance is sold, not bought.
Agents sell the vast majority of life policies written in the U.S. because the life insurance industry has a vested interest in pushing high-commission (and high-profit) whole-life policies.
3. Whole life is expensive.
Policies with an investment component cost many times more than term policies. As a result, many people who buy whole life often can’t afford an adequate amount of coverage, leaving themselves underinsured. It is possible to buy a combination of a smaller whole-life policy with a larger term policy riding on top. This combines an investment feature with adequate coverage.
4. Whole-life policies are built on assumptions.
The returns quoted by the agent are educated estimates, but they are not reality. Your stock broker would not sell you shares of IBM and pretend to tell you what the price will be in 20 years. Your insurance company has basic guaranteed rates—make sure you look at those, instead of assuming that the projected accumulation values and interest rates are guaranteed.
5. You may want to keep your investing and your insurance separated.
There may be better places to invest, without paying the high commissions and expenses of whole-life policies. On the other hand, life insurance cash has many favorable tax advantages, both in life and in death, and if you have a trusted life insurance agent in your family, it is worth meeting with him/her and discussing options and possibilities. Nine Year Mortgage believes that where money is concerned, knowledge is power.
6. Buy enough term coverage to fill your needs.
Life insurance is no place to go easy, especially when the cost for coverage is at historic lows. The rule of thumb is at least 10 times one’s average salary, but some experts say 20 times is better. The old saying is that no widow ever said her husband owned too much insurance!
7. Match the term of the policy to your needs.
You want the policy to last as long as it takes for your dependents to leave the nest, for your retirement income to kick in, for the house to be paid in full, or until you are certain you will not have a large estate tax burden which is best paid through life insurance.
8. Buy when you’re healthy.
Older people and those who have health problems pay much higher rates for life insurance – so buy as early as you can, but don’t buy until you have dependents. (spouse or children) It is best to err on the side of buying early, since one never knows when a health problem will arise.
9. Tell the truth.
There’s no sense in shading the facts on your application to get a lower rate. Be assured that if a large claim is made, the insurance company will investigate before paying, and if they can prove that you were not honest in your application, they will not pay the claim.
10. Use the Web to shop.
Buying term life insurance has never been easier, thanks to the Internet. You can get tons of quotes on line, and avoid the pushy salespeople. However, if you want to use your life insurance as an investment vehicle, which many people do, then an agent can be a valuable financial counseling partner for the features and benefits of a whole life policy. Once you get a policy, make a note to shop every few years for a better rate, or even at the same rate to reset your term. If you can get the same rate on a new 20 year policy after three years, it makes sense to take advantage and get the new term. Be aware that most companies have a two year waiting period on certain types of events, like suicide
Nine Year Mortgage can help you find an honest insurance agent to take care of all of your insurance needs.
Insurance is a passive need in that you don’t really want it until you need it. Unfortunately at that point you’re too late. Don’t get caught unprepared, you may be surprised to discover how reasonable the rates actually are. For more information on life insurance contact a Nine Year Mortgage representative in our service department at (888)790-2174.
Follow these tips from Nine Year Mortgage and rest assured that your loved ones will be protected should the worst happen. And if you’d like to learn more about Nine Year Mortgage products and services then contact us today. To find out if you qualify for the Nine Year Mortgage program, simply complete the Nine Year Mortgage Do I Qualify Form.
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