The life insurance industry has changed dramatically in the past decade. The main reason is the economic downturn. Before, most people owned their own homes, and they were able to pay off the mortgage and cover their living expenses by taking out a life insurance policy. Unfortunately, when the economy crashed, more people lost their homes and insurance. Today, life insurance is extremely difficult to find, and eventually it’s unaffordable for many people. Luckily for those of us who don’t have a life, insurance companies have found a way to make us feel a lot better about the loss by offering.
Review your insurance needs:
Talk to your insurance agent, he or she can help you assess your insurance needs and provide information on available products.
Decide how much cover you need:
How much of your family's income do you produce? How will your family cover final expenses and debts upon your death? Based on your answer to these questions, decide how much coverage you need, for how long, and how much you can afford. You want to make sure you purchase enough insurance coverage to cover the financial impact of your unexpected or untimely death on your family.
Evaluate your current life insurance policy:
If you already have a life insurance policy, do not cancel it until you have received the new one. You have a minimum period of time to review the new policy and decide if it contains what you want. Keep in mind that it may not be necessary to cancel your policy, but rather to change it to achieve the coverage or benefits that you want.
Compare between the different classes of policies available:
There are two basic types of life insurance: term insurance and cash value insurance. Term insurance generally carries the lowest premium payment for the first few years, but without increasing cash values, which you will be able to use in the future. For its part, insurance for cash value can be one of several types: whole life, universal life, and variable life. Your choice will depend on your current needs, your future needs, and what you can reasonably afford.
Make sure you can meet the premium payments:
Before you buy a life insurance policy, make sure you can handle the premium payment. Can you cover the down payment? If the premium increases later; can you afford it?
Get an insurance agent to help you assess the future of your policy:
How quickly does the cash value of your policy increase? Some policies have low cash levels in the first few years, which increase rapidly over time. Other policies have a cash value with a more balanced increase. Ask your agent for a year-by-year breakdown of the values or benefits involved.
Keep your current policy in effect:
It is important that you do not drop your policy to buy another without evaluating both alternatives. Replacing one policy with another can be expensive.
Understand the renewal policy:
You can renew most term insurance policies for one or more terms if your health condition has changed. Each time you renew your policy for a new term, the premium may go up. Ask what the premium will be if you continue to renew the policy. Also ask if you would lose the opportunity to renew the policy after reaching a certain age.
Read your policy carefully:
Do premiums or benefits change from year to year? How much do benefits increase under the policy? What part of the premium or benefits is not guaranteed? What is the effect of interest payable on money paid or received at different times under the policy? These questions should be able to be answered by reading your policy.
Review your insurance schedule from time to time.
How will inflation affect your future needs? Will you need more insurance coverage as your family grows? Review your policy with your agent from time to time to cover changes in your income and needs.
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