Life Insurance Lowdown

By Priya Jestin, Staff Writer

For most of us, life insurance is not something we think about too much. Most people just prefer to check out their options, take an insurance policy that suits their budget and requirements and then forget about it. However, now with the growing number of life insurance options, it will be foolish to avoid checking them out just because we aren’t too interested. When you look to buying a policy, it does help knowing the options available to you.

One of the basic choices you’ll need to make is whether to buy term or cash value. Term pays off only when you die whereas whole life gives offers you term life plus a savings account; so you get a payoff after you’ve paid the policy premiums for a certain number of years. If you do want to go in for a term policy, ensure that it is convertible to a cash value policy so that you can convert and guarantee yourself another period of fixed, albeit higher, premiums.

For some people, a life insurance policy is a form of investment. A form of ‘compulsory’ savings that allows you to get a lump sum amount after a fixed period of time. Agreed life insurance has a wider role to play, however, there is no harm in treating it like a form of investment as well. But when you do that, you have to invest considerable thought and groundwork into the process of getting yourself an insurance policy. Here are five important guidelines to keep in mind while planning your finances.

Do Your Homework: Before investing your money, ensure that you have done your homework well. Don’t get taken in by aggressive sales pitches and remember that insurance agent is more interested in his/her ‘commission earned’ or ‘business garnered’. So, you may end up with a policy that doesn’t suit your specific needs.

Know The Trends: Update yourself with the latest product trends, market conditions and changing economic scenario. This way, you will not be completely at the mercy of the agent to provide you with information and solutions.

Be Involved: A simple tip: while taking life insurance, ensure that you read the form carefully and fill the form truthfully. If you don’t do an honest job of it, and discrepancies are found in your form, it could lead to rejection of claims at a later stage.

Inform Your Loved Ones: As soon as you get yourself a policy, inform your family members and any other people you may have appointed nominees. This will ensure that they are better placed to follow up with the life insurance firm for the claim proceeds should something happen to you.

Maintain Records: Always maintain a record of your life insurance policies. Share the details of this record with your dependents. In the case of an eventuality, your dependents will knows their exact financial status.

Could it get any lower — I have a feeling that if this trend continues, very soon, we’ll get life insurance for free (I know that’s like too much wishful thinking but hey, why not). According to the Insurance Information Institute, premiums for individual life insurance are expected to continue a downward trend in 2007 with a drop about 4 percent. Chron.com reports:

The reduced premiums are expected for both term and permanent life insurance, the III said. Term life insurance provides protection for a specific period of time, say 20 years, and pays a benefit if the purchaser dies in that period. Permanent life insurance promises a death benefit as long as the consumer pays the premiums.

Read more: Forecast: Insurance Premiums to Fall

Have you ever thought of selling cash value life insurance as an investment? You probably need to think again because according to experts, this is a very foolish thing to do. Elpasotimes.com reports:

A cash value life insurance policy isn’t an appropriate vehicle to pay for children’s college expenses. The suitable vehicle is an asset-allocated mutual fund as an education IRA. Children need just enough life insurance to pay for a funeral, which can be purchased as a child term rider on a parent’s term life insurance policy.

Read more: Don’t think of whole life insurance as savings