First, decide how much you need--and for how long--and what you can afford to pay.
Next, find out what kinds of policies are available to meet your needs and pick the one that best suits you. Such as one to pay off a Texas home loan, or simply your burial expenses.
Then, find out what different companies charge for that kind of policy--for the amount of insurance you want. You can find important cost differences between life insurance policies by using cost comparison indexes. It makes good sense to ask a life insurance agent or company to help you. An agent can be particularly useful in reviewing your insurance needs and in giving you information about the kinds of policies that are available. If one kind doesn't seem to fit your needs, ask about others.
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Your Present Policy
Think twice before dropping a life insurance policy you already have to buy a new one.
1. It can be costly because much of what you paid in the early years of the policy
you now have was used for the company's expense of selling and issuing the policy. This
expense will be incurred again for a new policy.
2. If you are older or your health has changed, premiums for the new policy will be
higher.
3. You may have valuable rights and benefits in your present policy that are not in the
new one.
4.You might be able to change your present policy or even add to it to get the coverage
or benefits you now want.
Check with the agent or company that issued your present policy--get both sides of the
story. In any case, don't give up your present policy until you are covered by a new one.
How Much Do You Need?
To decide how much life insurance you need, figure out what your dependents would have if
you were to die now, and what they would actually need. Your new policy should come as
close to making up the difference as you can afford.
In figuring what you have, count your present insurance--including any group insurance
where you work, social security or veteran's insurance. Add other assets you have--savings,
investments, real estate, and personal property.
In figuring what you need, think of income for your dependents--for family living
expenses, educational costs and any other future needs. Think also of cash needs--for the
expenses of a final illness and for paying taxes, mortgages or other debts.
What Is The Right Kind?
All life insurance policies agree to pay an amount of money when you die. But all policies
are not the same. Some provide permanent coverage and others temporary coverage. Some
build up cash values and others do not. Some policies combine different kinds of
insurance, and others let you change from one kind of insurance to another. Your choice
should be based on your needs and what you can afford.
A wide variety of plans is being offered today. Here is a brief description
of two basic kinds--term and whole life--and some combinations and variations. You can
get detailed information from a life insurance agent or company.
Term Insurance
covers you a term of one or more years. It
pays a death benefit only if you die in that term. Term insurance generally provides the
largest immediate death protection for your premium dollar.
Most term insurance policies are renewable for one or more additional terms
even if your health has changed. Each time you renew the policy for a new term, premiums
will be higher. Check the premiums at older ages and how long the policy can be continued.
Many term insurance policies can be traded b efore the end of a conversion perior
for a whole life policy--even if you are not in good health. Premiums for the new policy
will be higher than you have been paying for the term insurance.
Whole Life Insurance
covers you for as long as you live. The common
type is called straight life or ordinary life insurance--you pay the same
premiums for as long as you live. These premiums can be several times higher than you
would pay at first for the same amount of term insurance. But they are smaller than the
premiums you would eventually pay if you were to keep renewing a term policy until your
later years.
Some whole life policies let you pay premiums for shorter period such as 20 years, or
until age 65. Premiums for these policies are higher than for ordinary life insurance
since the premiums payments are squeezed into a shorter period.
Whole life policies develop cash values. If you stop paying premiums, you can take the
cash--or you can use the cash value to buy continuing insurance protection for a limited
time or a reduced amount. NOTE: Withdrawals may have applicable surrender charges. Ask your agent about the other implications of taking out cash value. (Some term policies that provide coverage for a long period also
have cash values.)
You may borrow against the cash values by taking a policy loan. Any loan and interest
on the loan that you do not pay back will be deducted from the benefits if you die, or from
the cash value if you stop paying premiums.
Combinations and Variations.
You can combine different kinds of
insurance. For example, you can buy whole life insurance for lifetime coverage and add
term insurance for the period of yoru greatest insurance need. Usually the term insurance
is on your life--but it can also be bought for your spouse or children.
Endowment insurance
policies pay a sum or income to you if you
live to a certain age. If you die before then, the death benefit is paid to the person
you named as beneficiary.
Other policies may have special features which allow flexibility as to premiums and
coverage. Some let you choose the death benefit you want and the premium amount you can
pay. The kind of insurance and coverage period are determined by these choices.
One kind of flexible premium policy, often called universal life, lets you vary
your premium payments every year, and even skip a payment if you wish. The premiums you pay
(less expense charges) go into a policy account that earns interest and charges for the
insurance are deducted from the account. Here, insurance continues as long as there is
enough money in the account to pay the insurance charges.
Variable life
is a special kind of insurance where the death benefits and cash
values depend upon investment performance of one or more separate accounts. Be sure to
get the prospectus provided by the company when buying this kind of policy. The
method of cost comparison explained herein does not apply to policies of this kind.
Finding an Affordable Policy
After you have decided which kind of life insurance is best for you, compare similar
policies from different companies to find which one is likely to give you the best
value for your money. A simple comparison of the premiums is not enough. There are other
things to consider. For example:
Do premiums or benefits vary from year to year?
1. How much cash value builds up under the policy?
2.What part of the premiums or benefits is not guaranteed?
3. What is the effect of interest on money paid and received at different times on the
policy.
Guaranteed and Illustrated Figures.
Many policies provide
benefits on a more favorable basis than the minimum guaranteed basis in the policy. They may
do this by paying dividends, or by charging less than the maximum premium specified.
Or they may do this in other ways, such as providing higher cash values or death benefits
than the minimums guaranteed in the policy. The currently illustrated basis
reflects the company's current scale of dividends, premiums or benefits. These scales
can be changed after the policy is issued, so that the actual dividends, premiums or
benefits over the years can be higher or lower than those assumed in the indexes on the
currently illustrated basis.
Some policies are sold only on a guaranteed or fixed cost basis. These policies do not
pay dividends; the premiums and benefits are fixed at the time you buy the policy and will
not change.
Things to Remember
1. Review your particular insurance needs and circumstances. Choose the kind of
policy with benefits that most closely fit your needs. Ask an agent or company to help you.
2. Be sure that the premiums are within your ability to pay. Don't look only at the initial
premium, but take account of any later premium increase.
3. Don't buy life insurance unless you intend to stick with it. It can be very costly
if you quit during the early years of the policy.
4. Read your policy carefully. Ask you agent or company about anything not clear to you.
5. Review your life insurance program with you agent or company every few years to keep up
with changes in your income and your needs.
Selecting a life insurance company
and purchasing a policy
is a very important decision. It involves a long-term financial commitment and usually
a long-term business association with an insurance representative.
Naturally, you'll want to feel comfortable with that individual and feel good about your
decision. You'll want to feel assured that your insurance company is reputable, financially
stable and service-oriented. And you'll want to trust your insurance representative and rely
on him or her to help you choose the best policy for your needs.
To help you make an informed decision, contact us for additional literature or conveniently purchase a policy on line right now.
Quote & Buy Online
Austin Insurance Group
Austin - Cedar Park
(and all Texas Counties)
512-339-2901 email: aig@texas.net
