As in many other professions there is a lot of misinformation being bandied around about life insurance that, if listened to, can make a rather simple decision very complex. Life insurance is basically a very simple subject, a very important subject but also quite simple. You may hear people say they don’t want to talk about it because it is based around your dying before any proceeds are paid out. What rubbish! There is nothing more honourable than to care about the family you love by making provisions so that if you should be taken from them, they could go on living the life you want them to live, even though you can not be there with them personally. To think otherwise is down right selfish and shallow.
Buying sufficient life insurance to protect your family against financial ruin can make you feel proud and give you a peace of mind that is part of the joy of being a responsible parent and breadwinner. It is an important move that should be commended. If every family in the world was adequately insured against the loss of their main income earner, there would be much less misery in the world and governments could save billions of dollars on welfare payments.
To simplify the buying of life insurance online there are only two main types of life insurance you need to understand. These being:
- Term Life Insurance.
- Whole Life Assurance.
Term life insurance
This is the most popular type of life insurance sold these days as many insurance purists claim that life insurance should be left to life insurance purposes alone, and investment matters should be dealt with separately. If you go along with this then you will agree. There is absolutely no investment money tied up with term life insurance. It is pure life insurance in the sense it is like other insurances. You take it out for a certain period of time and if you should die during that time your beneficiaries will be paid the amount of insurance you had purchased. If you survived the life of the policy all the premium payments you had paid for the cover you had purchased will be forfeited.
Term life insurance is very cheap when you are young because the life insurance company believes the chances of you dying and them having to pay out is very slim. As you age the situation changes and the cost increases as the risk on your life increases. Therefore every time you renew your term life insurance policy it will either cost you more or you will have to lower the amount of insurance you carry. This can be very beneficial however, if you play it right, because you are usually more financially exposed when you are young and this is the time when term insurance is at its cheapest. Very large amounts can be purchased with rather low premiums to cover your mortgage as well as ensure your growing family is well catered for.
Whole life insurance
Permanent life insurance or universal life insurance is all whole life insurance. This type of life insurance has an investment component, meaning some of your premium money goes towards providing the life cover and another portion into investment.
Over time the investment component builds and you are able to borrow from it. If you wish you can also cash it in and receive its cash value. However if you do this your policy will be terminated and you will find yourself with no cover. Left alone and if you keep paying the premiums (which remain the same throughout the life of the policy) it will remain in force for your entire life. This type of policy is good if you take it out as a basic policy when you start work. You can then provide yourself with sufficient cover so that if you should die early your loved ones will not have to find the money to pay for your funeral nor pay out any debts on your behalf that you left behind. It is also a good policy to have with you on retirement when you can either cash it in to receive its proceeds for yourself or leave it till you finally die to bequeath it to a legacy, or have it distributed among those you leave behind.
Because term life insurance is much cheaper than whole life insurance it is best to use term insurance when you need large amounts of cover. If you have used whole life insurance as a basic cover you will then be able to boost your insurance needs when you need to do so with term insurance. For instance when you buy your home and take out a large mortgage and when the family starts growing and you need the extra cover to ensure they are fully protected. At least until the youngest turns 18 years of age.
Shopping Online for Life Insurance
With the biggest decision about the type of life insurance made, you can avoid all of the news and advice and simply look at the policies on offer. The first thing you need to do when comparing life insurance policies is to decide on a cover amount, so you know you are comparing apples with apples.
The amount of life insurance cover you need will depend of your financial situation but as a rule of thumb you will need sufficient to cover the funeral costs and any debts you owe including mortgage’s, personal loans, credit card debts etc. You will also need enough money for your family to invest that would return them enough in interest to replace your earnings. In this way your family could continue the life they had become accustomed to.
Next you will need to make sure you research the insurance companies you are comparing, because when you shop online it can be hard to tell the difference between a reputable company and a fly-by-nighter. Therefore, read product reviews and company histories and annual reports.
Finally you need to compare all of the terms and conditions of the life insurance policies available online, because the one with the cheapest premiums shouldn’t necessarily be your first choice. If you can’t find terms and conditions online, contact the insurance company as they should be very free with this information, and you should be suspicious if they’re not.
This article was written by Will from Life Insurance Finder. Visit Life Insurance Finder to compare life insurance quotes.