You may find this a little surprising, but many people live without any kind of live coverage even in this twenty-first century America. Some do not want to talk about it because they automatically associate their own death with it. However, one should never turn away from the fact that if he does pass away earlier than usual, it is only a life insurance policy, which can save his family from financial ruin. Of course, there is another group of people, which avoids such policies; they do that simply because they cannot make any head or tail of such policies and find the terms much too complicated to fathom. Let us therefore, try to clarify some basic points through some frequently asked questions.
What is a life insurance policy? Do I have any choice here? If I do, which one is the most affordable?
A life insurance is a legal and binding agreement between a person and a life insurance company. The person who will purchase a policy will be known as the policy holder. The policy holder will chose the type of policy that he/she wants, the amount of coverage he/she needs, and the term of the policy. On the other hand, the insurance company is responsible for indemnifying the loss of life of the policy holder with the amount of coverage that was agreed upon.
The term of the policy refers to the amount of time that the insurance company is obligated to cover a policy holder with insurance. The term of a policy will range from a single year to a maximum of thirty (30) years. Within this term, the policy holder is covered with life insurance and his/her beneficiaries will receive the death benefit if the policy holder dies within the term. However, if the term has already expired, the insurance company will no longer be obligated to pay the death benefits.
How much does an average policy cost?
Different policies cost differently. A term life insurance will cost the least while policies that offer opportunities for cash built along with usual life insurance protection cost more. Even different term life policies cost differently and more importantly, the same policy may cost at a different rate if the underwriting profile is different. That is why if you are looking for cheap term life insurance quotes, you should not only opt for a fully underwritten traditional term life policy, but must also make sure that your underwriting profile remains compatible to underwriting guidelines followed by most carriers. Moreover, term duration, coverage amount and premium payment mode too have an effect on the rates.
How do I purchase a Life Insurance policy?
A life insurance policy cannot easily be purchased ordinarily. There is a process that must be followed before a person can become a policy holder. The person who wants to be insured must apply for a policy. Once the application has reached the insurance company, an insurance underwriter will conduct an interview with the potential client. The interview will get pertinent information about the persons family background, occupation, sports and hobbies and other details that will help determine the persons insurability. The insurability of a person will be based on his/her life expectancy. The life expectancy will also be based on the results of an extensive medical exam that an insurance buyer must undergo before he/she is approved of coverage.
The greatest problem with fully underwritten policies is that they take more than a month to finish their underwriting process. However if you want you can also have instant coverage; you simply need to opt for no medical term life insurance policies. These policies generally complete all their formalities online; what is more, they do not usually take more than twenty-four hours to complete their underwriting process and extend the coverage. People generally buy them for their simplified purchase procedure. But for most healthy and tobacco free persons, they may turn out to be little more expensive.
How much should I insure myself?
The amount of coverage that a policy holder will need will depend mostly on the needs of his/her family. If the persons family is accustomed to a luxurious lifestyle then the policy holder must make sure that the amount of coverage will maintain this lifestyle even after the death of the policy holder.
Ideally, the coverage should be so large that income from this amount will be able to replace the income you bring in now. Therefore, the coverage amount should ideally be at least ten to fifteen times your annual income before tax. Take note of the interest rate as well; if it is at 8% now, your coverage amount should at least be 12 times your annual income.
Article by David Livingston of EQuote, who is a specialist in everything life insurance. For more information on cheap term life insurance and low cost life insurance, visit his site today.
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