Life insurance is one of the pillars of personal finance, deserving of consideration by every household – it’s vital for most. Yet, there remains a great deal of confusion, and even skepticism, regarding life insurance. However, armed with the proper information, you can simplify the decision-making process and arrive at the right choice for you and your family.
If anyone relies on you financially, you need life insurance.
It’s virtually obligatory if you are a spouse or the parent of dependent children. But you may also require life insurance if you are someone’s ex-spouse, life partner, a child of dependent parents, the sibling of a dependent adult, an employee, an employer or a business partner.
Life insurance does not simply apply a monetary value to someone’s life.
Instead, it helps compensate for the inevitable financial consequences that accompany the loss of life. Strategically, it helps those left behind cover the costs of final expenses, outstanding debts and bonds, planned educational expenses and lost income. But most importantly, in the aftermath of an unexpected death, life insurance can lessen financial burdens at a time when surviving family members are dealing with the loss of a loved one. In addition, life insurance can provide valuable peace of mind for the policy holder. That is why life insurance is vital for the bread winner of a single-income household, but still important for a stay-at-home spouse.
Why it is extremely important to consult a trusted financial advisor rather than simply applying for cover online.
There are many online tools that can help give you an idea of how much money you should pay for the policy you need. But once you get to that point, it is best to contact a real, live financial advisor who can walk you through the application and underwriting process. Clients and even many intermediaries do not understand the importance of accurate and complete disclosure of vital information when applying for insurance and similar products. This leads to rejection, repudiation and myriad of other preventable problems.
The premiums at a given insurance company are identical whether you apply online, via a toll-free number or with a person. Indeed, a knowledgeable and dedicated insurance broker or agent may help you save money by choosing the best carrier for your particular situation.
Know your options when cancelling an existing life insurance policy so you don’t leave money, or coverage, on the table.
If you have a policy that isn’t appropriate for you—or you simply no longer need it—it’s important to proceed carefully. First, if you realize that you have overpaid for a policy that doesn’t meet your needs, but you still need life insurance, don’t cancel the wrong policy until the right policy is in place. Who knows, you could learn of a health complication that is going to lead to you being declined for the new policy. Then you’d be left without any coverage. Always consult a trusted financial advisor before cancelling your policy.
Know when to review your life insurance portfolio.
According to legislation, your insurance portfolio needs to be reviewed at least once a year. It’s also a good idea to review your need for life insurance whenever a major life event occurs.
Consider the following events and the ways in which life insurance might help protect your family in each scenario:
- New home purchase or major home improvements:
Life insurance can cover your bond or home equity obligations in the event of your death.
A wedding should prompt you to review your entire financial situation, including your income needs, debt, and other liabilities, and to add a layer of protection for both spouses.
- Birth or adoption of a child:
A life insurance policy can provide protection for your family’s increased income needs and any debt you may have taken on, including education expenses.
- 10 things you absolutely need to know about life insurance – Tim Maurer
4 important questions to ask about life insurance – fidelity viewpoints