Do not just focus on getting the best price when researching life insurance policies. The purpose of a life insurance policy is to protect your family from financial hardships in the event of your early passing – to provide a payment that will help your family cope financially.
If price is the only consideration, you will purchase a ten year term life insurance policy and only purchase the minimum amount that you feel will work. Usually, that is enough to cover a mortgage with a little left over. This puts your family and you at risk on three fronts.
First, while there is a renewal option in most life insurance policies after ten years it is usually five or six times what the first ten years cost. Insurance companies know that the primary reason people renew their tem policies are that they are too sick to purchase a new life insurance policy so they make it very expensive to renew as they expect to have to pay more claims for people who renew.
Think of your friends, have any had a health scare in the past ten years. We hear from people who have had a little skin cancer, diabetes type 2, or weight issues, for example. However, the biggest issue these days is avocation issues like back country snowmobiling and skiing, scuba diving, rock climbing etc. These people will have to pay a premium that could be significant if they want to purchase a new life insurance policy. Some might be uninsurable and be forced to renew their insurance policies at five or six times the first ten year rate or reduce the coverage to what they can afford which is quite a penalty.
Second, just purchasing a life insurance policy to cover the mortgage is a very common but short sighted solution. While the mortgage will be paid off, where does the money come from to replace the missing spouse’s income? Depending on the marital status, dependent children, and spouse’s career opportunities, there could be a significant need for additional funds to maintain the family’s standard of living. We find that there is a need for additional life insurance for both spouses including “stay at home” spouses as their contribution to the family is significant in so many ways.
Finally, the price for a life insurance policy can be very similar across several companies. How do you choose the company to use if there is say less than a dollar between five companies? There are significant differences between term life insurance policies offered by insurance companies. We frequently find that as one gets older and their health deteriorates, it is good the option to convert some of the term policy to a permanent policy – usually $25,000 to $100,000. While it is more expensive it will be there at the end for final expenses, to top up the surviving spouses pension, cover taxes, charitable gift, or for a gift to children and grandchildren. It is important that the company chosen guarantees these options in the policy and has a history of offering a variety of options for permanent life insurance.
You are going to spend thousands of dollars on life insurance over your life, do not just focus on the price when you are researching life insurance policies. Get the help of a professional life insurance broker. It cost nothing and they are there to guide you through the above risks to make sure that you purchase the best life insurance policy for you and your family’s situation.
