Depending on how closely you’ve looked at your life insurance policy, or how detailed you were about planning for expenses following your death, you may think that you know a lot about life insurance. But as with anything, no one can possibly know everything. In the case of life insurance, it’s what you don’t know that can affect your policy and what your family receives, along with many other things.
Your Online Quote May Not Be Completely Accurate
A great way to get a handle on how much your life insurance policy will cost you is to go online and get a quote. Most of these services only take seconds to render a number once you’ve input your information. But although the number you may receive once doing so may be affordable, that’s not all there is to it.
The actual price of your insurance policy cannot be determined until a few things have taken place. In order to get an accurate number, you will first need to send in an application for insurance. Then, you may be asked to provide additional information with regard to your lifestyle, family’s health history and your own history. Finally, you may need to have blood tests and a medical exam done by the insurance company. Only after these things have been completed can you get the most accurate price.
As well, no agent can give you an accurate quote for insurance, because how much you pay will ultimately depend on the underwriter, who is responsible for evaluating your life insurance application. The underwriter will have to follow a policy to determine how much you pay for coverage.
Lapsing Is Common
As ironic as it may be, allowing your policy to lapse is not uncommon. In fact, the rates at which policy owners allow them to lapse is very high, about 40% of all individual policies, according to a study done in 2005. These lapses are occurring within the first five years of having been obtained, which is another ironic fact.
Interestingly, death claims were never made on over eighty-five percent of all of the term life insurance policies which were issued to individuals who are residents of the United States.
Older Americans and Life Insurance Policies
The current economy in the United States has caused many older Americans to struggle financially. For these individuals, having a life insurance policy can seem more like a financial burden than protection for loved ones, especially considering that rates tend to rise as we age.
Reducing a policy’s face value, especially if it’s a universal plan, can assist a retired individual with saving money as they maintain coverage. This is because the premiums for life insurance can rise drastically and quickly for those of retirement age.
Relying on cash value to pay rising premiums on a policy could mean that there is a lot less money should the insured reach the age that the policy matures and therefore pays out. The solution to this potential issue is to extend the date of maturity to ten or twenty years past the set age.
Many older Americans choose to access the cash value of their policy. But oftentimes, this requires the payment of something called a cash surrender fee, which does vary by insurance company but can add up to a large amount of money. To avoid this, experts advise closely monitoring your policy and exploring all options available which may help you reduce or avoid the fee, such as changing beneficiaries.
Paying attention to the behavior of your chosen policy, as well as staying on top of any changes in the life insurance market can help ensure that you are never taken by surprise by a change in your premiums or different information about your policy than you expected.Citations: 40% of all policies allowed to lapse
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