Buying a life insurance plan? Then, be careful because life insurance is difficult to understand. You can be conned into buying something under false pretenses.
Recently a prominent life insurance company together with many of its brokers paid a huge fine because it created a life insurance plan but was disguised as a pension plan. Little attention was paid to what a life insurance plan is truly made to provide.
Life insurance coverage is not an investment for your benefit. It’s guaranteed income tax-free cash paid to someone you specify in case of your death. In the event that you deeply care about someone and want to safeguard them, then buying a life insurance plan makes sense.
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Are you the principal caregiver for your loved ones? Well, your lost income may have horrible implications and jeopardize the ability of those you love to continue to enjoy their standard of living.
The only way to guarantee an immediate replacement of this money is with the purchase of a life insurance plan. Notice I didn’t say term life insurance, low cost guaranteed issue life insurance, or complete life insurance.
Over time I’ve delivered a huge amount of money from life insurance gains to the families of deceased policyholders. And no one has ever before asked me what type of life insurance coverage it was.
Term is the cheapest, but it’s improbable the death benefit will be paid since the guaranteed issue life insurance policy will probably lapse before you die.
At this time the cost may seem to be cheap compared with other life insurance types. But what goes on when you’re a senior?
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Term life insurance payments can be level for a specific number of years, but when that number of years are up the price will skyrocket to a cost you won’t be able or inclined to pay.
Whole life insurance covers you at a set premium cost until the insurance policy generally is paid-up. This may be 10, 20 years … or when you reach age group 65, 85 or 100.
One kind of life insurance plan is definitely not better than another. But it’s critical you realize what you are buying, how it works and your total costs.
After all, if the policy isn’t in force when you expire you have tossed your premium dollars right down a hole.
You should consider universal life. This type of policy can promote the death benefit up to time 115… regardless of the performance of the financial investment.
Although more expensive than term life insurance, universal life is much less costly when compared to a typical whole life insurance policy.
But be cautious because some universal life policies can be purchased by concentrating on projected interest rates rather than contractual promises.
If you are considering the purchase of a whole life insurance policy from a company that declares annual dividends, ask the agent for a hypothetical illustration utilizing a dividend forecast at least one percent less the existing rate.
In the past when long-term interest rates were higher, shared companies showed very attractive dividends with their policies.
But today with long-term rates still very low, it’s unlikely a life insurance policy will perform as illustrated.
In summary, absorb the guarantees of whatever life insurance policy you decide to buy. Also, ensure you know the credit history of the life insurance company.
There is little or nothing incorrect with term life insurance, but understand your alternatives about changing to a permanent plan. This could be critical if you feel uninsurable before the policy expires.
Remember… you may never get another chance to help make the right decision.