As Ben Franklin said, the only things certain in life are death and taxes. If you're responsible you'll make sure that you're prepared for both.
Loss of a loved one can be incredibly hard on a family. Emotional toll aside, medical costs have likely added up, work has been lost, and funeral costs are high. Plus the loss of a working family member can leave those left behind in dire straits.
That's why investing in a good life insurance policy should be essential for anyone with a family they want to be taken care of after they go. Despite the importance of life insurance, many consumers remain uncertain or misinformed about the subject.
While it can be a difficult subject to talk about, it's important to be well informed so that you can get the best policy for you and your family. Read on, and we'll walk you through our ten best tips on choosing a life insurance policy.
1. Reputation Matters
Like any sort of business transaction, it's important to properly vet the insurance company that you're considering working with.
It will be vital that you can rely on the company if the worst were to happen, and you want to be able to trust them. So when picking an insurance company, make sure to pick one with a stellar reputation.
There's a number of places to look when it comes to understanding an insurance company's character. Insurance commissions and relevant government agencies typically keep a close eye on companies and can offer quite a bit of information if asked.
The Better Business Bureau also keeps a list of accredited companies on their website for easy perusal. Any company accredited by the BBB has proven that they will resolve consumer complaints in good faith. You should think twice before working with a company that has failed to obtain accreditation from the Better Business Bureau.
Outside of these official entities, you can also rely on the word of mouth from your family and friends.
Inquire if anyone has worked with the company or companies you're interested in and what their experience has been like. If you know someone who's had a positive experience with an insurance company, it's more likely that you will then too.
2. Evaluate Financial Stability
A life insurance policy is a long-term investment. In an ideal situation, you would get a policy young and hold onto it for many decades before your eventual passing. It's important, then, that the company you choose to go with has the financial stakes to last for the many years to come.
Most insurance companies are rated in terms of their financial stability by a variety of outlets. Many independent companies work to analyze and evaluate insurance companies. They can aid you in evaluating companies' health and longevity.
These companies likely use different rating scales and have different ways to evaluate and score. Sometimes, they may even disagree. Checking a company at more than one can give you a more well-rounded view of their stability and promise.
3. Term Vs. Whole Life
One of the most important decisions you'll make when investing in life insurance is whether to get term or whole life insurance. You'll need to look at your personal situation, your budget, and your expectations for the future to make a smart decision.
Understanding the difference between the two types of insurance is essential. Term insurance has much lower premiums and is easier to understand. For a more affordable price, a term life insurance plan will cover you if you pass during a certain amount of agreed upon time.
This may be ten years or thirty, or whatever you agree to with the insurance company.
If you were to pass away during this time, your family could cash out the life insurance policy. If you were to live through it, then nothing would come from the policy at the end of the day.
Whole life policy, on the other hand, does exactly what the name implies. It's much costlier, but it covers you from the moment you sign up until you pass, and your family's cash out is pretty much guaranteed.
It can be hard to extend or reinstate an expired term insurance plan once the period has passed, but their affordable prices continue to make them more popular.
4. Planning For What You Can Afford
Picking out a life insurance policy that works for your wallet sounds like it should be common sense.
But what many consumers forget to do is think of the long term. It's impossible to predict what financial pitfalls or tragedies may come in the many years to come. When such things happen, life insurance is usually high on the list of things people can't afford to pay for anymore.
That's why it's vital to choose an insurance policy that's not only affordable for you now, but for whatever financial situation you might find yourself in the future.
Though it's impossible to know what your budget might look like years in the future, selecting a premium that's friendly to Future-You can't hurt.
5. Work With Non-Captive Agents
Life insurance agents may work under a variety of circumstances. Most are understood to be either captive or non-captive agents.
A captive agent works solely for one life insurance provider. They do not work for or look at plans and pricing from other companies, and the sales they do benefit only that insurance company.
On the other hand, non-active agents are not tied to a single insurance provider. These independent brokers work to represent multiple companies at once. This means they can compare rates, plans, and details of multiple companies at once.
A non-captive agent is much better equipped to get you the best plan for your situation, without bias or outside pressure. When researching a company, make sure to ask if their agents are captive or non-captive.
6. When Is Payout?
One important aspect that varies between life insurance plans is the time of payout. In the case that you were to pass away, you'd likely want your family to be able to receive the insurance payout quickly, if not immediately. The financial hardships surrounding a death are at their worst in the immediate aftermath.
And yet, not all insurance plans provide the immediate payout. There are no exam plans, for example, that allow insurance companies to wait up until two or three years before having to pay out 100% of the proceeds.
When picking out a plan, it's much more advisable to select one that can promise 100% payout in the immediate aftermath of death. Other plans can lead to a wealth of issues.
7. Term-to-Life Conversion
Situations change, and a good life insurance policy should understand that. You may find yourself one day wishing to change your term life insurance to a permanent one.
Typically, this kind of conversion would allow you to switch your term-based plan to a whole life one without the need for another medical exam.
This can be a huge deal as one gets older. If you've developed a medical condition over the years with your term plan, you might not be able to qualify for a new plan. The conversion policy allows you to avoid this potential pitfall and convert without any pain.
Not all insurance policies have a conversion policy, so it's important to check when picking out a policy.
8. Living Benefits
Not all life insurance policies include living benefits, but a competitive market has pushed an increasing amount of companies to offer them.
Living benefits are insurance payouts that can help in the aid of serious medical trouble, but prior to death. If you are diagnosed with a chronic illness or need to be placed in a medical care facility, your policy can help to support these costs.
If receiving life benefits is important to you, then you should make sure your life insurance policy includes them before you commit.
9. Accepts Automatic Payments
Once you sign up for a life insurance policy, it's something you'll be paying for a long time to come.
Because it's such a long-term reoccurring cost, it'll likely do better for your peace of mind if you set up automatic payments with your bank. It's essential that you don't forget to make your payment, as a failure to pay could result in the cancellation of your plan.
Not all insurance companies accept automatic payments, but most do. It's always smart to double check with your company before signing all the paperwork.
10. Shop For Your Situation
Different insurance companies view various health risks differently.
Risks like smoking, diabetes, international travel, or spotty family medical history can all add to your premium depending on where you shop for insurance.
Working with an agent who understands your particular situation can help to find a company that won't charge an arm and a leg for the aspects of your situation you can or won't change.
Shopping For A Good Life Insurance Policy
Life insurance can be one of the most important purchases an individual makes in their whole life. A good life insurance policy will provide for the financial stability of loved ones after death, but also remain affordable and easy to manage while you're still alive and kicking.
Check out our blog for more insurance advice, tips, and tricks.