Must know for Life Insurance Shopper

1. Be sure you can afford the premium

Before you buy a life insurance policy, you should ask yourself these questions:

• • Can you afford the initial premium?

  • If the premium increases later, will you still be able to afford it?
    (The premiums for many life insurance policies are sensitive to changes in the company’ investment earnings, claims costs, and other expenses. If those are worse than expected, you may have to pay a much higher premium.)

  • Ask your agent what might be the highest premium you’d have to pay to keep your coverage.

2. Understand the application process

• • You can apply for life insurance through life insurance agents, the mail, and online.

  • In addition to basic information, such as your name, address, employer, job title, and date of birth, you’ll be asked for more personal information.

  • Depending on the type of policy, the insurer may require you to see a doctor, answer health-related questions, or have a medical professional come to your home or office to assess your health.

  • Usually a policy that doesn’t require detailed health information willcost more and  provide less coverage than one that does.

  • It’s important to tell the truth on the application. The insurance company will check your answers so review the application before you sign.

  • If the insurance company discovers false statements on your application after it issues your policy, it could reduce or cancel your coverage.

3. Choose a Beneficiary

• • A beneficiary is the person(s) or organization(s) you name to receive your life insurance policy’s death benefit.

  • You’ll need to know the Social Security or tax identification number for all beneficiaries.

  • Experts advise you not to name a minor child as a beneficiary.

  • Insurance companies won’t pay a minor. Instead, consider leaving the money to your estate or trust.

4. Evalulate the future of your policy

Does your policy have a cash value?

• • In some cash value policies, the values are low in the early years but build later on and jn other policies the values build up gradually over the years.

  • Most term policies have no cash value.

  • You should always ask your insurance agent, financial advisor, or an insurance company representative for an illustration showing future values and
    benefits or when it will end.

5. Read Your Policy Carefully.

After you carefully read your policy, you should be able to answer the following important questions:

• • Is your personal information correct?

  • Do premiums or policy values vary from year to year?

  • What part of the premium or policy value isn’t guaranteed?

  • How will the timing of money paid and received affect any interest the policy might earn?

    Your insurance agent, representative or financial advisor can help you understand anything that isn’t clear.