Insurance Finder and Tips

Navigating the important aspects of shopping for term life insurance can be daunting to someone who’s new at it. You need to consider aspects payment plans, annual costs, deductibles, benefits, understanding the various types of life insurance and how needs change with changing circumstances. Here’s a list of common mistakes shoppers of life insurance often make.

Not purchasing life insurance
The first major mistake people often make is not purchasing life insurance at all! According to LIMRA, an insurance research organization, 30 percent of American household have no coverage at all (August 2010 report).

Being under or over coverage
The second biggest mistake is when you do purchase life insurance, the coverage is not sufficient to equal the family’s needs, according to the trade group, American Council of Life Insurers (ACLI).

A common mistake people make is not considering the value of a stay-at-home spouse. Such a person is often under-estimated but according to Marvin Feldman, president and CEO of the nonprofit Life and Health Insurance Foundation for Education (LIFE), it would take about 7,000 a year to replace a stay-at-home spouse.

Coverage should include the debts that you would leave behind, such as a mortgage or outstanding credit card payments. While you should make sure your family is adequately covered, you should avoid paying for more coverage than you actually need. This puts an unnecessary burden on your expenditure—money you could put to good use, elsewhere.

Making a decision based on money alone
In other words, don’t purchase the cheapest term life policy! Read the fine line and compare quotes thoroughly. Often a life insurance company will offer free riders or other benefits that may save you costs long term. Look for product features such as renewability privileges, conversion rights, riders and company ratings.

You should examine the rating of the life insurance carrier as well. The ratings will give you information about the financial strength or integrity of a life insurance company. You need a life insurance company you can trust to expedite your death benefits to your loved ones in a timely manner after you are gone.

Not evaluating your coverage periodically.
Life insurance needs change as life changes. You may get married, have children, purchase a house, etc. The converse could also be true. Your children may have moved out of the house, your debts are paid off. You may not need as large a coverage as you initially purchased. These changes must be reflected in your life insurance coverage. It is advisable to conduct a life insurance need analysis at least every 2 to 3 years.

Cancelling an old term life policy before a new one is in effect
Life insurance is competitive and you may be able to find a cheaper life insurance policy with added features. Don’t cancel the old policy until your new policy is in effect. This ensures that you are covered all the time. If anything were to happen to you during that, albeit, brief period of time between coverage, both your old and your new life insurance company would not be obligated to pay any death benefits to your family.

Not checking a life insurance application form before it is submitted.
Agents or brokers often fill out the form for you. Ideally, you should either fill out the form yourself or check all the facts before submission. Remember, any error on the form can be considered as falsified information. It is a criminal crime and may result in termination of policy. If the discovery is made only after you die, a life insurance company can withhold payment of death benefits to your beneficiary.

Neglecting to do research
Don’t be influenced by a savvy salesman who may want you to purchase a particular policy simply because he or she stands to gain from the sale. Do your own research and ask the right questions. There are helpful website that serve as credible research resources to know more about life insurance—the types available and which one is most suitable for you.

Ask questions. Remember, life insurance companies hike premiums and you need to when they do and by how much. Many people neglect to consider such issues and their policy is allowed to lapse simply because they could not afford to pay the hiked up premiums. For term life insurance, lapse rates were around 7 percent in the first and second year and about 6 percent in the third year, according to a report from LIMRA (2009). To avoid this, you may want to consider purchasing a level term life policy. This will keep your premiums steady for the entire term period.

Not shopping around for life insurance
You don’t need to run from one life insurance Company to another to get a quote for comparison. The Internet provides a fast and reliable means to get multiple term life insurance quotes online. You can compare life insurance rates from the best carriers and make an informed decision. Such online providers may save you a substantial amount of money as well. You may be able to get savings of up to 70 percent on a cheap life insurance policy with terms that perfectly suit your personal situation.

A mortgage life insurance is a type of insurance policy that is designed to pay off your mortgage in the event of your untimely death. The insurance company will pay off any outstanding balance left on your mortgage leaving your family debt-free. Typically, in this type of insurance, as your mortgage decreases, so does the amount of insurance.

How Mortgage Life Insurance Works

When mortgage insurance begins, the coverage must equal the outstanding amount on the repayment mortgage. The policy’s termination date must coincide with the date scheduled for the final payment on the repayment mortgage. The insurance company calculates the annual rate at which the insurance cover should decrease in order to reflect the value of the capital outstanding on the repayment mortgage. Some mortgage policies will include provisions for payouts if the policyholder is diagnosed with a terminal illness from which he or she is expected to die within a year of being diagnosed.

Purchasing mortgage life insurance is not such a good idea. In fact, it’s hard to find any mortgage life insurance which offers good value. The main reason why purchasing this type of insurance is a bad idea is because currently, traditional mortgage life insurance rates are not as competitive, as say, most term life rates.

Reasons why mortgage life insurance is not a good idea

Mortgage life insurance policies are generally expensive to begin with. As time goes on, these policies become even more expensive. The premiums stay level throughout the term period but the amount of death benefit becomes less at the same rate as the debt does. The cost for coverage starts out high and the policy gets worse over time in terms of the amount of death benefit.

Mortgage life insurance will only re-pay your mortgage if you should happen to die with the insured period. This may leave your surviving spouse debt-free, but mortgage insurance will not address any other income needs of your family which may arise due to your sudden demise. Most families have financial needs that go beyond payment of mortgage.

Term Life Insurance Makes More Sense

The death benefits that come from a term life policy can address any kind of debt and other financial needs your family may face.

You can take out term life policies for a term period of 10, 20, 25 or even 30 years. If you have already finished payments on your mortgage, you may want to review your term life policy to reflect those changes. Or, you may want to use the coverage for other future expenses you may have, such as education fees of your children, or a retirement plan for your spouse. With term life insurance, you have the freedom to change the objectives of your insurance policy as your life situation changes. Mortgage life insurance does not allow you this type of freedom.

Underwriting for term life policy is cheaper. If you’re in good health, taking a term life policy could work out beneficially for you. For example, if you saved 0 on annual premiums by taking up a term life policy, rather than mortgage life insurance, this will add up to a savings of 00 at the end of 30 years. It is always best to get an insurance policy with guaranteed lower rates than a mortgage life insurance policy.

More People Choose Term Life Insurance over Mortgage Life Insurance

It is more common to see people purchasing term life insurance with return of premiums options instead of mortgage life insurance. At the end of the term, all the premiums you have paid are refunded to you, tax-free.

Another better option to mortgage life insurance is a level term life policy. A level term life policy will give you the benefit of paying level premiums throughout the term period. And unlike mortgage life insurance, your death benefits will not decrease during the full term period.

Finding the Best Deal on Term Life Insurance

You can get the best term life insurance at the most affordable price by using online life insurance providers. Many of these not only offer the best term life insurance quote but also free professional services to help you identify policies that suit your needs the best and make meaningful recommendations. Look for online life insurance providers who are BBB-accredited and are affiliated with the best life insurance carriers in the industry. They will provide you with instant life insurance quotes which you can use to compare prices and products. This will help you make an informed decision and land you with a policy that best suits your needs at the most affordable price.

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