Have you ever wondered why insurance agents try to rope you into purchasing whole-life policies? The premiums are higher than that paid for term-life policies and both have the same death benefit. The business of life insurance is very competitive and the agents who sell these policies depend entire on the commissions that they earn.
You may be informed by your agent that whole-life policies help you build up case that is tax-free and that you can borrow from this. They do not tell you that you pay higher fees and commissions and if you wish to cancel the policy the surrender charges are also high. You will hardly have any cash value after you take out this type of policy.
Read between the lines and ask pertinent questions
Insurance companies pay nearly 80% of your first premium as commission to the Salesforce. Of course it brings in five to ten times more money which they can easily afford to pay the agents. The unfortunate part of this deal that you do not come out as the winner!
Term policies on the other hand can be bought today with level premiums for 20 to 30 years. The reason for life insurance is your dependents can continue to live in the same lifestyle as your income gets replaced.
Remember that life insurance is no substitute for a retirement plan. Once you retire you should be able to stop paying insurance premiums and live on the income earned.
How to identify a good insurance company
- Check out reputed websites that offer a list of top insurance companies and offer reviews about each one.
- The company should have a good rating and offer details on their policies
- They should have a list of many policies in their database
Types of insurance policies that are on offer
- Whole life Insurance – you pay fixed premiums and are guaranteed benefit payouts on your death. If the policy is kept current you can expect coverage as long as you live.
- Term Life Insurance – is not as expensive as Whole Life Insurance. You can expect complete coverage at low rates and expect guaranteed death benefits for your current plans.
- Universal Life – offers a flexible option of payment with adjustable premiums. You can maintain this policy indefinitely and look forward to a guaranteed interest rate and also a monthly income options for your beneficiaries.
- Survivorship Life – your beneficiaries receive the full amount of the policy which is tax-free. It generally covers your spouse and yourself and gives you control over your legacy and estate.
The future sustainability of a family is the primary reason for taking out insurance policies. It is a good idea to buy insurance for your family members once they become adults. This will ultimately give you peace of mind as you will be assured that they can continue living in the same style that you provided for them in your lifetime.