Life insurance is some of those seemingly complicated concepts that are grossly misunderstood by many people and surrounded by misconceptions. If you've never considered taking out a policy, it's about time you did Life insurance. Because as it turns out, life insurance is really a pretty straightforward contract between an individual and an insurance company. Listed below are five basic facts that should help clear any misinformation.
Life insurance is an economic plan, no investment
Some brokers advertise life insurance as an investment opportunity. No type of coverage or policy can allow you to build your wealth, not even those with a cash value. Consider life insurance as an economic security plan or retirement plan, no investment or business venture.
Term vs whole life insurance
You will find various kinds of life insurance policies, but each of them generally come under either term or whole life insurance. Term life is really a policy you buy for a specified period, usually between 10 and 30 years. Life time is really a life-long policy with a cash value.
Life insurance is surprisingly affordable
Lots of people shy away from life insurance policies because they assume that the premiums are too expensive. Well, that's not true. According to Finder, a healthy middle-aged Australian can pay less than $4.40 per week for a $250,000 insurance policy. Most policies can be even much cheaper invest the them at a young age.
A life policy can be a lot more
The key purpose of life insurance is to secure your beneficiaries' financial future after you're gone. But it may be a lot more than that. For example, most insurers include optional life insurance riders inside their policies to cover financially straining situations such as disability, lack of income and terminal illness. You can even utilize the cash value of to secure loans and other financial perks.
Your credit score may not affect your lifetime insurance premiums
Statistically, individuals with low credit scores are more prone to file insurance claims than those with high credit scores. In some cases, insurers regard a low credit score as a high-risk factor, which frequently means higher premiums - for example, when buying car or home insurance. But in regards to life insurance, things certainly are a bit different.
Even though underlying rules, guidelines and requirements can vary between companies, the credit score generally has minimum influence on life insurance terms. Insurers typically focus more on life expectancy than the client's credit history when calculating premiums.
Also, filing for bankruptcy may not affect your policy either. However, in the event that you apply forever insurance right after filing for bankruptcy or with several bankruptcy cases on your record, the insurer might have the capability to limit your coverage options.
It's for anyone
Life insurance is not just for older persons and retirees. Anyone can remove a policy, including children. Insurers evaluate insurance applications on a case-by-case basis. Every policy's terms and premiums are personalised to an individual's status, such as age, health history, dependants, financial situation, and the capability to pay the premiums. Regardless of your age, health condition or job situation, there is a policy for you.
Hopefully, these few facts help highlight that which you should expect when buying your first policy. You are able to always speak to an insurance agent to get all your questions answered before buying a policy. Additionally, if you're not happy with your current policy, you can find approaches to conveniently switch things around to accommodate new preferences.
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