People purchase insurance to protect them against financial hardship caused by loss. They choose to cover their automobiles, homes, travel trailers, or boats. One of the most important types of insurance that a person can invest in is life insurance. No one likes to consider their own mortality and we would all like to believe that we are safe from catastrophic events. The plain truth is that anything can happen to anyone at anytime. Life insurance is designed to assist with the financial burdens that can occur as a result.
The application process for obtaining life insurance is a very thorough and meticulous one. The premiums that will be charged are based on the health and lifestyle of the applicant. Someone in perfect health, with no pre-existing conditions will enjoy a less expensive rate than someone with a history of heart problems. Family history plays a part in qualifying a person for life insurance. If there is a history of diabetes or cancer in the immediate family, then rates will also be affected. If someone does happen to have serious health issues, their premiums may be rated, or increased, and the applicant even runs the risk of being declined for a policy. All of these medical conditions must be disclosed by the applicant. They will also be subject to an interview by a nurse and a medical assessment to check blood pressure and other vitals.
The lifestyle of a person can also have an impact on the decision to purchase a life insurance product. Someone who holds a dangerous job or smokes or drinks heavily, is considered to be a higher risk and therefore will be subject to increased premiums.
Keeping this in mind, the next step is to determine the amount of insurance that is required. The insurance should be sufficient enough to cover immediate needs as well as any future expenses and requirements. The amount is determined by taking into account income, assets, debts, and expenses.
Immediate needs include such things as funeral expenses. The death of a loved one is an extremely stressful and shattering event that can be further compounded by the cost of a funeral. Most people don’t have quick access to thousands of dollars that are required to pay for expenses related to a funeral. Life insurance will help to ease this financial burden, giving surviving family members one less thing to have to worry about. Other immediate needs would be paying bills and rent or mortgage. There is less money coming into the household because of the sudden loss of income.
Once these expenses are finalized, there are still more needs to consider. If there are children involved, their future needs must be kept in mind. They will need continuing care which means that clothes, food, and child care expenses will need to be covered. There is also a chance that a child will want to attend college or university after graduating from high school. The cost of post secondary schooling increases every year, and life insurance can be used to cover these costs.
There are also several different life insurance products to choose from. A licensed life insurance agent should review all of these options and help you to determine which one is the best for you. Two main choices are term insurance and permanent insurance. Each has their advantages and drawbacks, so it is important to compare the two and figure out which one suits you best.
Term insurance is usually the less expensive of the two. It is purchased for a certain amount of years, which could be anywhere from 10, 20, to 25. Once the end of the term is reached, the insurance policy will expire. A new policy can be purchased, but depending on the product, the applicant may be subject to another medical evaluation and this can affect the premium. This type of life insurance is beneficial if the applicant has a large investment that they want to have covered in the case of their death. A mortgage is a great example of one of the expenses that need to be covered immediately.
Unlike term insurance, permanent insurance is valid until the insured passes away. It can cost more than term, but there are no worries about having to constantly renew or purchase another policy. The other benefit is that it can involve both the life insurance amount plus investments. Dividends can be cashed in or used to pay for future premiums.
Once the decision to purchase insurance has been made, the insured should review the policy on an annual basis. Needs and lifestyles can change several times over the years, so changes to the policy and coverages may be necessary.
