It is unlikely that a 30-second spot will adequately explain the benefits and drawbacks of life insurance products. This is a better way for you to find the best insurance.
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John Buenger is familiar with this scenario all too often when he runs his independent insurance agency. A TV ad for life insurance may appear, but people are surprised when the policy doesn’t match their expectations. Buenger is a senior financial adviser and manager at Rice Agency in Hagerstown.
Life insurance looks simple on the surface. All products have the same basic structure: you pay the insurer premiums and, if your death occurs, the insurer pays your heirs the death benefit. There are many types of life insurance. It is not always easy to see the differences between them in a 30-second spot. Many key information is often left out of TV commercials. This is a better way of learning about these products, so the next time you see a life insurance ad, you will be able to tell if it’s too good to true. Insurance Products That You Might Not Need
Learn the Basic Types
Based on the type you choose, there are differences in how much coverage, costs, features and restrictions.
Guaranteed issue Kelly Maxwell, the owner of Seniors Mutual, a Texas insurance brokerage, said that guaranteed-issue life insurance policies are the most popular TV ads. These policies do not require a medical exam or underwriting and anyone can apply for them. Maxwell states that insurance companies can set up policies in as little as five minutes and provide coverage for life.
There are many cheaper options for those who are healthy enough and willing to undergo a medical examination. Even applicants with mild health issues, such as high cholesterol, might be eligible for a lower rate after undergoing a medical exam. Buenger recently ran the numbers for a healthy 70 year-old man with $10,000 of life insurance to pay funeral costs. A policy that required a medical exam cost $67 per month. However, a guaranteed-issue policy costs $99 per month. This is nearly half the price. Because guaranteed-issue policies can only provide limited coverage, typically up to $25,000 per month, they are often used for funeral expenses. Policies with a medical examination could offer six to seven figures of coverage.
To use your cash value from life insurance policy
Permanent life. Permanent life insurance does not expire as long as you continue to pay the premiums. These policies will pay a higher death benefit than term life policies, which can cost between five and 15 times as much. Because of this, coverage that is less affordable may not be as accessible.
Permanent life insurance may also have cash value. This allows you to withdraw money from your policy while you are still alive. The type of permanent insurance will determine how the cash value grows, and whether the premium stays constant. Whole life, for example, charges the same premium as the policy’s term. The cash value increases with a guaranteed return. Variable life policies, however, place the cash value in market-based investments like mutual funds. The return is not guaranteed. Your death benefit will increase if the investments perform well. However, if they fail, you might have to pay more into your policy or lose coverage.
Accidental death. These products do not pay out for health conditions like cancer or heart disease. Maxwell says that these policies rarely pay out and the definitions of accidents get smaller every year. “People buy these products just because they look cheap, and they are. But customers don’t know the restrictions on their coverage.”
Grandchildren life. Advertisements may advertise policies that can be set-up for grandchildren and other family members who are younger than 18. These policies are affordable and can be purchased for grandchildren or other family members younger than 18. Grandparents Raising Grandkids: The Joys and Challenges
Shop around and be a Skeptic
You should treat the ads if you are looking for life insurance with skepticism. Don’t call the hotline on the ad. The representative will only want to sell you the advertised product. If you’re not in good health, it is a good idea to shop around. Companies have different medical ratings which could affect pricing. One insurer might charge less for patients who have had cancer in the past than another.