Life insurance is one of those ostensibly complex issues that is often misunderstood and surrounded by misunderstandings. If you’ve never considered purchasing insurance, now is the moment. Because, as it turns out, life insurance is just a simple contract between a person and an insurance company. Here are five simple facts to clear up any misunderstandings.
1. Life insurance is a financial plan, not an investment
Some brokers advertise life insurance as an investment opportunity. No type of coverage or policy can help you build your wealth, not even those with a cash value. Think of life insurance as a financial security plan or retirement plan, not an investment or business venture.
2. Term vs whole life insurance
There are many different types of life insurance policies, but they always fall into one of two categories: term or whole life. Term life insurance is a policy that you buy for a specific amount of time, usually between 10 and 30 years. A whole life insurance policy has a cash value and lasts for the rest of your life.
3. Life insurance is surprisingly affordable
Many people avoid purchasing life insurance because they believe the premiums are too high. That is simply not the case. A healthy middle-aged Australian can pay as low as $4.40 per week for a $250,000 insurance policy, according to Finder. Most insurance are significantly cheaper if you get them when you’re young.
4. A life policy can be so much more
The primary goal of life insurance is to provide financial security to your beneficiaries when you pass away. It can, however, be so much more. Most insurers, for example, add optional life insurance riders in their policies to cover financially burdensome scenarios like disability, loss of income, and terminal illness. The cash worth of can also be used to get loans and other financial benefits.
5. Your credit score may not affect your life insurance premiums
People with low credit ratings are statistically more prone than those with excellent credit scores to file insurance claims. In some circumstances, insurers consider a low credit score to be a high-risk factor, resulting in higher premiums, such as when purchasing vehicle or home insurance. However, things are a little different when it comes to life insurance.
Although the underlying rules, norms, and requirements may differ from company to company, the credit score has little to no impact on life insurance conditions. When calculating rates, insurers often consider the client’s life expectancy rather than his or her credit history.
Also, declaring bankruptcy may have no bearing on your insurance policy. If you apply for life insurance soon after filing for bankruptcy, or if you have a history of bankruptcy, the insurer may be able to restrict your coverage options.
6. It’s for everyone
Life insurance isn’t just for pensioners and senior citizens. Anyone, including minors, can purchase a policy. Insurance applications are evaluated on a case-by-case basis by insurers. The terms and rates of each insurance are tailored to an individual’s situation, including age, health history, dependents, financial situation, and ability to pay premiums. There is a policy for everyone, regardless of age, health, or employment circumstances.
Hopefully, these few facts provide some insight into what to expect while purchasing your first insurance coverage. Before purchasing a policy, you may always speak with an insurance agent to get all of your questions addressed. Furthermore, if you’re unhappy with your present policy, there are options to easily change it to meet your new tastes.
Make use of the numerous online comparison engines to ensure you obtain the best deal on your current or new insurance policy.