Buying Life Insurance: Tips on What to Look For

Everybody at some point worries about the financial status of their family's security after death. Will the bills be met? The kids; will they be able to go to college? Will my family keep our home? These questions and many more seem to loom over the heads of many. The solution is always the same: Life insurance. But who wants to discuss life insurance, let alone buy it! Buying life insurance is one of those necessary things that you have to force yourself to do, but always at some point in the near future that somehow never comes. Since it has to be done, it's wise to arm your self with as much information a s you can in order to make the right choice for you and your family.

Here are some sound buying tips that will help take the drudgery out of a sound investment.

• Research all prospective life insurance companies. Though almost all insurance companies of repute follow the strictest guidelines placed by the Insurance Marketplace Standards Association, there are some that also align themselves with the recommended ethical code laid down by the Insurance Information Institute. That's fine and good, but when you buy a policy, you are entrusting the life insurance company with your hard earned money, so you want to choose financially strong and stable companies with enough money in reserves to be able to pay their claims. Another area to look at when choosing a company to work with is the company's rating strength. Credit rating companies like A.M. Best and Standard & Poor's will rate how strong a particular insurance company is. This rating should be A+ and higher.

• Term, Whole Life or Variable Life Insurance- what's the difference? When first shopping for life insurance, it may be a little confusing trying to decide where to look and what kind of policy to buy. The Internet is always a good place to start as it will give you the most information from sites that provide only quotes to full service companies that get you covered quickly. They will help you decide which policy is right for you. Never rush to buy a policy from the first company you get hold of. If you find that selecting from a large number of life insurance companies is becoming too much of a hassle, try checking the Internet for insurance agents that can get you the best quotes from several leading companies. Look for agents that can understand your needs, answer all relevant questions with patience, and can advise on options like long term care and retirement planning. Just in case you didn't know, the younger you are the cheaper the cost.

• After you have found a reputable company to do business with, now comes the task of choosing the right product for you and your family. Here is a brief overview of the options: Term- is just as its name says. It is used when coverage is needed for a short period of time, young couples starting out in life, when a large amount of coverage is needed. This is the cheapest from of life insurance. The premiums will stay the same through the end of the term, afterwards, they may increase. Whole Life-is permanent insurance and does not end at a specific time; the policy usually covers through the life of the insured or endows at age 100. This type of policy serves many needs as well, but a few are final expense and plans paid in full in 10 or 20 years. The policy builds cash value and the monthly premiums stay the same for the life of the policy. Variable Life Insurance- is cash building policies. It's permanent life insurance with the cash value invested in the stock and/or bond markets. Premiums can be flexible here, but speak to an adviser about this and the many other benefits and features this product has.

• Always give correct details on your health. Give the complete truth concerning your health history when answering the application questions. If you're not quite clear about a question, ask until you understand.

• Review your policy every year. Circumstances change from year to year, but your insurance policy does not. That's why it's a good idea to go through and read it every year to make sure you have what you need. And remember: don't buy a policy if you can't afford it. That's throwing hard earned money away.

As you can see, the process toward buying life insurance is not that difficult, and if you get lost along the way, your agent is always near by.

Life Insurance Tips - How Does a Whole Life Insurance Policy Work?

By Amber Hemphill

If you have ever read your life insurance policy, only to have more questions than when you began, you are not alone. What does it all mean? Incontestability clause, exclusions and such, just make a person want to get to the bottom of the question...will the company pay the policy off when I die?  Lets do a quick life insurance policy walk through.

What is a life insurance policy anyway?

A life insurance policy is a legal contract between the person who buys the policy (called the insured) and the company that issued to policy (called the insurer). It will pay cash to a stated beneficiary when the insured dies. When a person first applies for life insurance, they are asked a series of questions to see if they qualify for the type of insurance they are applying for. Afterwards, they are given a Conditional Receipt which is a temporary insurance policy while the application is in the underwriting department and waiting for results for any exams that were ordered. This receipt may be used in case of death occurs before the actual policy is delivered, so make sure your agent reviews this with you.

Once the policy is issued and the agent reviews the kind of policy issued and what's included, he or she will explain the terms of the policy. Since a life insurance policy is a legal contract, there are some provisions or terms contained in it that you should know about. Some important ones are:

• Make sure there is a copy of the actual application in the policy. You don't want anything you said to be misstated or written in error by your agent, and if there is an error in the application, ask your agent how it can be straightened out. Because no one can change the policy once it has been issued, this is usually handled by an amendment.

• Know when your payments are due. This is usually done on a monthly basis, with lower premiums being drafted from a bank account. Some other payment options are yearly and every six or three months. To help protect you against an accidental lapse of the policy, there is a grace period of 30 days after the due date. But to stay safe, make policy premiums on time every months.

• The period of incontestability prevents the insurer from denying the claim because of statements made in the application after the policy has been issued. Basically it says that if the insured dies within the policy's first two years after issue and there is an untrue statement found on the application, the insurer can deny paying the claim. After the first two year period of the policy, the insurer is fully liable to cover the insured no matter what is on the application.

• Tell your true age. Some people think that if they claim they are a younger age, they'll get a cheaper rate. Well, if they are in fact the younger age, this logic holds true. But not so if they are older. If this happens, the insurer will correct this whenever a claim is made and the adjustment will come out of the beneficiary's proceeds.

• There are some things that a policy will not cover and are excluded from the policy. The insurer makes this clear at the time the application is signed. These are individuals who serve in the military, who fly aircrafts and who work in hazardous occupations or hobbies.

• Settlement options are the ways the insurance company will pay out the proceeds of the policy. The company usually pays a lump sum to the person listed as your beneficiary. However, there are options that you can choose from. You can choose to receive a fixed-period of installments, fixed amount of installments, income for life, or interest only payments. Ask your agent for details and if one of these options are right for your family situation.

• Non-forfeiture Options. Permanent life insurance policies have cash values, money that grows over time. This mean there are certain guarantees built into the policy that cannot be forfeited by the insurer. With these options you can borrow against the cash values built in the policy, use the values to convert to term insurance, or reduce the face amount of the policy to pay it up.

There are many more provisions and options that are too numerous to mention here. But these few should arm you with enough information to discuss your insurance needs with your agent, and for your agent to compile a thorough financial plan. More importantly, you now have an idea of how a life insurance policy works.