Life Insurance

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Tips on Purchasing Life Insurance

Here are a few tips for consumers in the market for life insurance or an annuity:

Become familiar with what you need: People buy life insurance for a few reasons. The most common is so when they die, their survivors do not have to deal with an added financial problem. Another reason is to pay estate taxes. Also, business relationships often require life insurance. Annuities can be a way for people to make sure they don't outlive their money. It is important to remember that life insurance should be purchased for protection, like any other insurance, not as an investment.

Find the best rates: Life insurance companies are competitive. Get quotes from at least three companies and go with the one that works best for you.

Go with the right plan for you: Ask yourself questions. Do you want to work closely with an agent? How fast will you be able to get to your money in an emergency? If you are buying whole life, how fast will your money accumulate? What will the cash value be in a year? How about 20 years? If you want to lower your premium, look at companies that save money by operating without agents. Consider your own needs.

Update your coverage as needed: Review your net worth every year or so. Consider the prospects your survivors may face if you die. It is not necessary to have additional policies for each of your children. Children rarely have an income or require life insurance.

Don't make unnecessary changes: Some life insurance policyholders have lost money when their coverage was changed to benefit the seller. People with cash-value policies may be persuaded to convert their coverage to another policy, often one with a promise of better benefits. The problem is that the cash value of the original policy is raided in order to pay for the new policy. That person may realize years later that the "higher" benefit policy was actually worth less than the value of the original policy.

Don't buy unless you understand: Save any informational material you get with your policy. Your agent should be able to explain the policy terms to your satisfaction. Make sure you understand the guarantees in your policy and the surrender penalties if you choose to drop the policy. These costs are often hidden, so make sure you ask.

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