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Five Things to Know About Life Insurance

Apr 30, 2013

You may know that life insurance pays a benefit upon the death of the insured person. In some cases, this benefit is used to pay final expenses. In others, life insurance benefits provide support for the deceased’s family, charity of choice or business. The purpose of a policy is the greatest determining factor when choosing a life insurance product. There are five things you need to know about life insurance before you sign on the dotted line.

1. There is a difference between whole life and term life insurance.

Whole life insurance is a long-term financial product. Premiums for whole life insurance are typically higher than those for term life insurance, especially for a young, healthy people. However, as age increases and health declines, rates for whole life insurance remain the same while term life insurance may become unavailable.

Premiums for term life insurance tend to be lower. However, the coverage ends when the term expires. Customers who want to continue their term life insurance may face higher premiums and a required physical exam to reinstate their policy. A term life insurance policy is an attractive option for parents with young children and entrepreneurs who want to protect their business interests in the event of their death.

2. Everyone doesn’t need life insurance.

While many people can benefit from a life insurance policy, life insurance isn’t necessary for everyone. Parents of minor children should purchase life insurance to ensure their children are taken care of when they die. Business owners need life insurance to protect their family from business debts.

3. Determining the correct amount of life insurance isn’t easy.

Calculating the amount of money needed to care for a family in the future is not simple. The needs of children and families change over time. The fluctuating rate of inflation makes it difficult to determine how much life insurance to buy. It’s always best to overestimate than underestimate.

4. Penalties are severe for early cancellation of whole life policies

A whole life insurance policy has a cash value component that can be used before the insured person’s death. There are also fees and costs for this type of policy, so the decision to purchase whole life insurance should not be made without careful consideration. Early termination fees and increased premiums for restarting a cancelled policy are significant.

5. Policies over $100,000 typically require a medical exam

Medical exams are generally required for term and whole life insurance policies that exceed $100,000. Premiums are based on life expectancy, so a medical history is part of every application.

About the Author
Jo Harris is the Outreach Director for the Morgan Law Firm. She is a frequent blogger on a variety of subjects. The firm is located at 4101 Parkstone Heights Dr., Suite 250, Austin, Texas 78746 and can be phoned at (512) 551-0807. Additionally, you can find more information on the Morgan Law Firm website.

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