Buying life insurance coverage is essential to secure your family’s financial interests in your absence. At the same time, it’s paramount to make sure that the policy you buy actually suits your needs. If you buy the wrong type of policy or if you buy your policy from someone who is more interested in his commissions than your family’s welfare, your family could suffer dire consequences.
Given below are five factors you need to consider in order to determine the suitability of your life insurance policy.
Length of Coverage
If you need life insurance coverage only for a specific period of time – anywhere from 10 to 30 years – a term life policy may be the best option for you. If you need lifelong coverage, you should choose a whole life, universal life, or variable life policy.
Buying a policy solely based on the recommendation of one broker or agent could be a bad idea. Many life insurance salespeople make misleading claims in order to sell products that they tend to profit the most from, rather than recommending the right product for your insurance needs. You might not discover your policy is unsuitable for years, often too late to do anything about it. If you are in doubt whether your policy is suitable, get a second opinion, or contact a life insurance lawyer.
Amount of Coverage
One simple way to calculate the amount of life insurance coverage you need is the DIME (Debt, Income Replacement, Mortality, and Education) formula.
Debt – Mortgage, credit cards, personal and business loans, car loans, student loans, and other debts you have
Income Replacement – How many years do you need your income to be replaced after your death?
Mortality – Your funeral expenses
Education – Your children’s educational expenses
Your policy’s face value should ideally cover all the expenses listed above.
Different insurance companies have different underwriting guidelines. Some companies, for instance, tend to categorize diabetics as high-risk consumers. Some companies tend to charge a significantly higher rate for people with a family history of certain serious illnesses. Some companies tend to charge a higher rate for people who travel a lot.
A life insurance broker who sells for many different companies may be able to find a more favorable offer if you are categorized as high-risk because of lifestyle, hobbies, or occupation.
If you choose to buy a term policy or a group policy from your employment, make sure it can be converted into a whole life or universal life policy if needed. If your insurance needs change in the future and if you need lifelong coverage, you can simply convert your existing policy without underwriting, instead of buying a new life insurance policy, which might be impossible if you have health issues later on.
Insurance Company Ratings
There are three rating agencies that rate life insurance companies for financial strength. There is rarely a good reason to purchase life insurance from a company with less than one of the highest ratings. If an insurance company has weak financials or has a reputation for denying or delaying claims, you are better off purchasing insurance elsewhere even if the cost is greater.
How a Life Insurance Lawyer Can Help You
Sometimes, your claim might be rejected by your insurer for no fault of your own. In such cases, you have the right to take legal action against the company and recover the claim amount in full. An experienced life insurance claims attorney can help you recover the settlement amount you are owed through negotiation or litigation.
Legal Help for Life Insurance Issues in California
Benjamin Blakeman has more than 40 years’ experience as a lawyer, over 20 years’ experience with life insurance, and 11-plus years as a certified mediator. He also has direct experience selling life insurance. He understands life insurance and can provide excellent legal advice on life insurance, annuities, and financial elder abuse.
THE FOREGOING IS NOT INTENDED TO BE EXHAUSTIVE AND IS NOT TO BE CONSIDERED LEGAL OR FINANCIAL ADVICE, NOR IS IT AN OFFER TO SELL LIFE INSURANCE OR ANY OTHER PRODUCT.