Life Insurance Types Part 3: Answering Your Questions
In the first post of this short series on our website, we talked about the basics of Life Insurance types and in part 2 on our blog we addressed some additional points to consider. This post will carry on with more things to take into account when purchasing Life Insurance.
7. What should I consider in naming life insurance beneficiaries?
Always name a â€œcontingent,â€ or secondary, beneficiary, just in case you outlive your first beneficiary.
Select a specific beneficiary, rather than having the proceeds of your life insurance paid to your estate. One of the great advantages of life insurance is that it can be paid to your family immediately. If it is payable to your estate, however, it will have to go through probate with the rest of your assets.
Be very clear in wording beneficiary designations. Naming specific children may exclude those born later. If your child dies before you, do you want the proceeds to go to that childâ€™s children? Changing the beneficiary designation is easy, but you have to remember to do it.
8. Does it make sense to replace a policy?
Think twice before you do, because in many situations it may not be to your advantage. Before dropping any in-force policy, make sure your â€œnewâ€ policy is paid for and in effect and first consider:
If your health status has changed over the years, you may no longer be insurable at preferred or standard rates.
Even if both policies pay â€œdividends,â€ it may be years before the new policyâ€™s dividends equal those of your present one.
If you replace one cash-value policy with another, the cash value of the new policy may be relatively small for several years and may never be as large as that of the original one. There may also be a period wherein a surrender charge is applicable on the first policy.
You should ask for a detailed listing of cost breakdowns of both policies, including premiums, cash surrender value and death benefits. Compare these as well as the features offered by both policies.
If you decide to surrender or reduce the value of the policy you now own and replace it with other insurance, be sure your new policy is in force before you cancel the old one.
9. As a single person, do I need insurance?
The answer almost always is yes. You may want to consider these options:
Disability income insurance – especially important for self-supporting singles without sizable assets, this can replace a good part of the income you would lose if you were unable to work because of accident or illness. If you donâ€™t have long-term group disability insurance at work, it would be wise to consider an individual insurance policy designed to replace at least 60 percent of your income.
Health insurance – if you donâ€™t have employer health insurance coverage, a policy for individuals is your first line of defense against ever-escalating medical and hospital costs. You can keep premium costs down by electing a large deductible, thereby â€œself-insuringâ€ as much as you can afford.
Life insurance â€“ even if you have no dependents now, you may later. Consider different Life Insurance types â€“ term vs whole or permanent life. If you buy now when you are younger and healthier, you can â€œlock inâ€ lowest-cost coverage, including guaranteed insurability.
This is the final post in a short series about Life Insurance types and what to consider when purchasing Life Insurance. If you need to talk to an agent, please fill out the Contact form on our website or call us at (816) 322 6350
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