It would be great if we knew exactly how long we have to live, but no matter how long we have, it will probably never seem enough. Some people don’t like to think about their own death, while others see putting a plan in place for the day they die as being one of the best things that they can do for their family.
Having a good life insurance policy in force is the best way to ensure that your family will be protected in the event of your death and will be able to deal with any expenses which result from your demise, such as funeral costs.
Good life insurance article to read.
Here are some of the best strategies for buying life insurance
Deciding on the type of policy
You should focus first on how much insurance your beneficiaries would actually need if you were to die tomorrow. There are various online financial calculators to help you do this. Then you should calculate your actual budget to come up with the maximum you can realistically put into a policy every year. Answering these two questions will usually let you know what type of policy to buy.
Apply on a trial basis
Once you figure out your budget, and the amount of insurance you approximately need you might as well apply on a trial basis. You can apply with an insurance company at no cost, with no money needed with the application, to get an approximate health rating. This process takes around 30-60 days so while the application is pending you can think further about the amount of insurance and even the type of insurance you need (term or permanent). Once you are approved and know the exact price you can then change the amount of insurance up or down or change from 10 year to 20 year term insurance or change from term to permanent or vice versa.
Cash Value policy is not more expensive than Term
At face value a cash value policy would seem to be more expensive than the term insurance since the premium paid on a cash value policy is generally 3-4 times the cost of term. But this is an apples to orange comparison in the same way that saying that a home mortgage is more expensive than rent on an apartment. It is not a logical conclusion.
Here is the simple reason why: When you make your monthly mortgage payment your net worth does not go down. When you pay rent on an apartment your net worth does go down. A mortgage payment is a transfer more than a payment. You are transferring money from your bank account into an asset that has value.
In the same way when you pay premium into a term policy your net worth goes down. Term insurance is not an asset per se because it is designed not to pay out. When you pay premium into a permanent policy the net worth of your estate (not necessarily your liquid assets) should stay the same or go up, because not only is a portion of your premium going into the cash value portion of the policy but you also are guaranteeing an increase in the value of your estate for your heirs upon your death.
So it’s not an issue of which is more expensive from an absolute standpoint but more of a cash flow issue. If you have a sufficient budget to buy that amount of insurance you need using all permanent insurance it might be best to go that direction. That being said, the average middle class American needs a lot of insurance on a tight budget and has to settle for term or term combined with a separate permanent cash value policy.
Select your agent wisely
Unfortunately there are simply not many good agents/brokers. It’s important for you to know that only 10-20% of insurance agents even stay in the business more than a few years. Life insurance companies in the last century realized that instead of marketing to consumers they could just hire an over abundance of agents, train them quickly (since it’s pretty easy to get a life insurance license), and get them to call on all their friends and family (some of you might have experienced this annoying sales habit from a friend or acquaintance).
The insurance companies know that even if the agent does not last more than a year in the business he or she will have at least sold a few policies to friends and family who trust them and made the insurance company a profit without their having to do any expensive marketing. Unfortunately this means a majority of policies are sold by inexperienced agents who simply recite what their parent insurance company tells them good or bad.