Life Insurance Tips

Material Misrepresentation

It's one thing to log on to an online quoting system with the goal of getting the best life insurance rates, but it's quite another to mislead the insurance company regarding your actual health. You're required to answer a few questions about yourself when you use online systems to find the best life insurance rates. If you answer these questions truthfully, you can get an accurate idea of what your rates might be (subject to underwriting). If you're dishonest, not only will your rate quote be inaccurate, but you also run the risk of getting a policy that won't pay out in the event of your death.

Life insurance policies will not pay out a benefit if they find material misrepresentation on the application for insurance after the death of the insured. Material misrepresentation is a purposeful lie or omission intended to alter the results of your underwriting. While the normal life insurance contestability period (the time that they're allowed to decline claims) is 2 years, in the event of material misrepresentation, there's no time limit. This means that if you misrepresent your health, your family might get nothing but a return of premiums upon your death.

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Using Riders to Increase Value

When you compare life insurance quotes, you're attempting to lock in the lowest rate for your policy. One of the ways you can get the best value for your money is by adding riders to your insurance policy.

What Are Riders?
Riders are additional benefits that are added onto life insurance policy contracts. These riders can add benefits such as a death benefit for a spouse or children, accelerated death benefit payments in the event that you're diagnosed with a terminal illness, and premium waivers to offer protection against a time when you can no longer pay your premiums. The riders are usually inexpensive to add and really pump up the value of a life insurance policy.

When you compare life insurance quotes, be sure to consider the added value that riders can create and try to find out what cost they might add before you buy a policy. That way, you make sure you get the most benefit for your money and that your family is given the most solid protection possible.

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Does an Online Quote Guarantee Cost?

When you get your life insurance quote online, you might be excited at the affordability of the quote you're given. But before you begin to write out your budget and count on that price, you must remember that the quote is not a guarantee of coverage or cost.

Before you can actually be issued a policy and be given your real cost, you must go through a process called underwriting. This involves evaluating your individual risk to the insurance company based on your health and health history. It's only once your health has been evaluated that you can get a real price.

Of course, once you have the price of your policy after underwriting, you're not actually covered. You must accept the quote by paying a premium before you're covered by the insurance benefit.

So remember, wait for underwriting to approve you, then pay your actual premium and you'll create a safe foundation for your family.

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Additional Uses for a Life Insurance Policy

Life insurance policy death benefit proceeds are useful for many different purposes --including some that can be beneficial while you're still living.

1. Inheritance: In order to guarantee an inheritance for their heirs, some people purchase life insurance policies. They may even put the policies into a trust in order to gain more control over when the death benefits are given to the heirs.
2. Spousal retirement funding: Life insurance death benefits have several different payout options. Some can pay out like an annuity, which makes them a great tool for additional retirement income for a surviving spouse.
3. Source of tax-free loans: If you buy a life insurance policy that accrues cash values, you can tap into those cash values while you're alive and take tax-free loans. You must pay the loans back with interest; however, unlike a conventional loan, the interest is paid back to your account since you're the lender. Any portion of the loan that's not paid off upon death could reduce the death benefit awarded to your beneficiaries.
4. Cash value savings: If you buy a whole life policy that accrues cash values, you can choose to surrender that policy and take the cash. While that means you'll no longer have a death benefit, you will have any growth your cash values have accumulated. Depending on the type of policy you have, that can sometimes amount to more than the premiums you paid in. Remember, any cash value you receive that's above the premiums paid is taxable.

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Tips for Searching for Affordable Life Insurance

While some families buy large life insurance policies that can help pay the anticipated college tuition and other expenses the heirs will experience after the death of their family member, other families need a more affordable life insurance option. Here are just a few tips to help you find a policy you can afford.

1. Choose a low death benefit. If you can't afford to supplement your family's income with a life insurance death benefit, choose a small death benefit that will cover the cost of your burial as well as a few months in salary.
2. Buy a term life insurance policy. By far, the most affordable life insurance policy type is a term policy. Your costs are almost completely restricted to the cost of insurance and, since the insurance company is only guaranteeing death benefit payout for a limited number of years, the rates are reasonable.
3. Buy a policy through work or other group. Sometimes, your work will offer a group life insurance policy at cheap rates. Other groups such as car clubs and senior groups may do the same. These policies may not be portable and you might lose them when you leave the group.

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The Importance of Life Insurance

If your family is in solid financial shape and has little debt, it's normal to wonder whether or not you actually need to purchase a life insurance policy. It's important to remember that life insurance can protect your family from more than just funeral and burial expenses.

After a loved one dies, it's not unusual for the surviving spouse to want or need to take some time off of work to deal with grief and get things back in order. In these cases, life insurance proceeds can be virtually invaluable. A life insurance policy can also help ensure that your surviving spouse is able to retire on schedule, rather than tap into retirement savings for income.

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