7 Substantial Things to Take Into Consideration Before Availing Life Insurance
It is highly imperative to plan for all the eventualities of life. Especially when you have a family, different calamities and catastrophic occurrences can affect the stability of their lives. This is why it is vital to plan and head off emergencies. The questions that follow discuss some of the things you need to think about when setting up a stable family.
- What’s the best type of policy for me?
There are two main types of life insurance: term and permanent. Choose a term life policy if you want to be covered for a limited length of time, and you want to select the amount of coverage. However, with a permanent life policy, you get lifetime coverage, and you can also build up some cash value. Decide on this based on your life circumstances and your money related goals.
- Whom can I name as the beneficiary?
Think carefully about what is best for the people that you will leave behind. You can have more than one beneficiary, and you can change them when you want to update who gets the death benefit. Another thing to consider is whether you want all the money paid out at once or in instalment payments.
- Will I have to see a doctor?
Yes, you’ll need to get a physical that will be paid for by the insurance company. They want to get an idea of the risk they are undertaking, depending on your health. After they set you up in a specific category, they will decide on how much you will pay for your premium once a month. This physical will include all your vital measurements, such as your height and weight, and they will take samples of your blood and urine and send them to a lab.
- Is it a good idea to set up a trust?
If your loved ones are particularly irresponsible, or if they are children or have special needs, you should, by all means, set up a trust to keep control of the money for the benefit of the recipients. Trust is definitely a case where an estate attorney would be very, very helpful, and essential. He/she will show you how to minimize estate taxes so that your beneficiaries will get the most of what you intended for them.
- Are there some cases where my policy might not pay the benefit?
Of course, there may be things that prevent your beneficiaries from getting their death benefit:
- Falsehoods on the application, such as claiming you don’t smoke when you do, or that you have no intention of flying in a plane or helicopter when you do. These are some of the lies that can cause your beneficiaries to lose out.
- Suicide – if, by chance, you end your life purposely within the first two years, then the policy will not pay any monies to your survivors.
- Risky or criminal behaviour – if your occupation includes criminal endeavours like robbery or extortion, then that could most undoubtedly impact with your family gets the benefit of the payout. Hopefully, you don’t plan to go skydiving or mountain climbing!
- How much insurance do I need?
Ask yourself: what is our household income and how much of that is mine? Multiply that by five to get the minimum your heirs will need. Also, think about large bills that may come due when you pass on. Has the mortgage been paid off? How much is going to be due for tuition for all children not yet finished with college? Take into account whatever savings you have on hand as well, and you can deduct that from the amount that will be needed.
- When is the correct time to purchase coverage?
Major life milestones such as a birth, or adoption, or marriage give ample cause to consider adding coverage on your life. When the makeup of your family changes, review and evaluate: who is depending on the salary you bring in? Even if you already have some coverage as a part of your employment, it is crucial to decide whether you should budget for more. Also remember, if you buy at a young age, your coverage will be cheaper then when you become more mature. It may be a good idea to avail yourself of the lower cost of insurance coverage while the children are still young and in need of financial assistance.
Likewise, if you’re making significant home renovations, or buying a new home outright, you may want to consider covering the mortgage to protect your loved ones from floundering while in debt. Another situation that can mean a reevaluation of the adequacy of your policy is when you get a new job. Most employers provide some coverage, but please check to see that it is enough for your family circumstances.
Additionally, be sure to provide for funeral expenses and the financial strain caused by the death of a stay at home parent. Without an employer, family coverage must come from an independent policy. Finally, estate taxes from the federal and state governments can be hefty and onerous. A good plan will take care of this eventuality.