Wednesday, December 24, 2008

Don't Live without Life Insurance

Most of us have bad attitudes toward insurance of any kind. I've heard people claim that most insurance is a waste of money. That insurance companies feed on your fear. It might be true that some insurance is totally worthless--like insurance on electronics. And some people tend to pooh-pooh or even forget about life insurance, especially when we're young. But once you start a family life insurance becomes serious.

Don't believe me? Read this story sent to me by a friend last month:

One of my dearest friends was traveling with her husband and 20-month-old daughter to North Carolina to spend Thanksgiving with his family. They left from their home in St. Louis and stopped about halfway at a hotel for the night. My friend woke up to the sounds of her husband's troubled breathing and could not wake him up. She started CPR, and called 911. Unfortunately he did not make it to the hospital. She was stranded in a strange city with her tiny daughter having just witnessed her husband's death. Family joined her and helped her through the next few horrific days. They were about to celebrate their 2nd wedding anniversary. Like many couples, they hadn't yet planned for the unexpected. No life insurance and no will.

I bring you this story on the day before Christmas in hopes that you will remember that one of your most important parental responsibilities is to protect your children. The man in the story above was in his early 30's. If he had not had children his passing would not have left as great of a financial burden on his wife. Without insurance she was left without health coverage or income.

Here are the top 10 things you should know about buying Life Insurance from Pay special attention to #7, #8, and #10, they might surprise you.

1. Shopping around can save money As with most insurance, when it comes to life insurance, it pays to shop around because premiums can vary widely. And thanks to the Internet, it's now easier than ever. From research, to quoting, to buying a policy, there's never been so much information available. Even if you need to speak to an agent or company, shopping on the Internet first can make your discussion more efficient.

2. Having enough coverage is crucial If you need life insurance enough to buy it, you also need to make sure you're not underinsured. It's important not to have too little coverage, because then you won't get the benefits you need. If you don't think you can afford life insurance, explore your options, because it's often cheaper than you'd expect. However, if you can't afford all the insurance you need right now, start with a smaller amount. You should be able to buy more at a similar price when you can afford it.

3. The healthier you are, the better the rates It's true—healthy people get better rates on life insurance. You will be asked to pay a higher rate for anything that shortens your life expectancy (e.g., smoking, taking regular prescriptions, engaging in risky activities, and being overweight). Consider what small lifestyle changes you can make that will improve your health and possibly your rates.

4. Buying sooner rather than later can help If you've been putting off purchasing life insurance because you don't want to pay the premiums, you may be doing yourself a disservice in the long run. The younger you are when you purchase life insurance, the lower your premiums will be. In addition, it's harder to get life insurance if you have some of the conditions that come with growing older.

5. It's important to regularly review your coverage The end of one year or the beginning of the next is a good time to examine your insurance needs. Any life change signals the need for a review of your overall financial plan. When it comes to life insurance, you'll want to make sure your coverage still matches the changes you've made. Marriage, the birth of a child, and impending retirement can all have an effect on the insurance you need and the coverage amount that's appropriate.

6. There are different types of life insurance Different types of life insurance have different characteristics and are intended to accomplish different things. For instance, term life insurance is generally designed to provide the maximum amount of protection for the smallest premium dollar, but only for a set period. On the other hand, cash value life insurance offers benefits for your entire life and an investment and savings component, although at a much higher premium cost. In the majority of cases, term life insurance is the better choice.

7. You might pay more by choosing monthly premium payments You may not realize it, but your life insurance might cost more if you pay your premium in monthly installments. Many insurance companies offer a discount if you pay your premium annually rather than monthly. Although the overall cost and benefits of the policy are more important than getting a discount, you might get a lower price by paying annually.

8. You shouldn't rely solely on the life insurance offered by your employer Many employers offer their employees group life insurance. However, this coverage is usually not enough to adequately meet your life insurance needs. More importantly, group life insurance policies from your employer are not portable, meaning that if you leave your job, you lose your life insurance coverage.

9. You should tell the whole truth and nothing but the truth If you lie or omit information on a life insurance application, your life insurance company may be able to terminate your coverage. They may also be able to charge you for the higher premiums you should have been paying, or deny claims. For this reason, make sure to answer all questions fully. There are many different life insurance companies, and even if you don't qualify for the best rate from one of them, you may still be able to get a good rate from another.

10. Buying more can be cheaper Life insurance usually costs progressively less per thousand dollars at higher coverage amounts (e.g., $250,000). That means doubling your coverage generally won't double your premium. If your life insurance needs increase, be sure to explore your options. It may not cost as much as you think to buy more coverage.

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