10 Things You Should Know Before Purchasing Life Insurance

Facts about Life Insurance

Facts about Life Insurance

The older you get, the more you learn about the various ways that you can effectively manage your finances. Many times, you learn about loopholes and benefits of the investments you make, and also about the best ways to reduce your liability in the long run. Investing money, instead of just aimlessly spending it, can give you monetary returns in the future. These returns form a financial foundation for the responsibilities you will encounter in the years to come, whether they’re for your own self or for our family.

With that thought, we’re going to touch upon life insurance. It is surely one of the wisest ways to make a long-term investment that will yield much greater returns in the future. It’s always wise to do your research if you’re looking for term life insurance quotes and schemes. However, do you know everything you need to about getting such a policy? Let’s explore some facts you probably haven’t been told about –

  1. Get a loan

When larger expenses come up, like the purchase of new assets or paying for college tuition, a loan usually comes to the rescue. However, getting a loan isn’t always that easy, and when you land one, the interest rates could be skyrocketing and unnecessary. A very interesting benefit of taking life insurance is that you can also use it as security and take a loan from the insurance company, and also do so at competitive rates. Permanent life insurance accumulates a solid cash-value over time, against which you can avail a loan. And since there’s already trust and relationship established with the company, getting a loan approval wouldn’t take half as long as it would with other financial institutions.

  1. Become an entrepreneur

If you have the idea, the determination and the plan of action for a great business idea, the biggest hiccup in getting things started would be the funding. Again, this would involve getting a loan or finding an investor who has faith in your idea, which is most likely going to be a long process of trial and error. All of this is based on previous trends, of course, but what we’re really trying to say is this: it’s not uncommon for new business people to look at life insurance policies as a source of funding. When you have a policy with a company, they’re more likely to approve your application and fund your idea.

  1. Retire early or take a break

Retire early or take a break

If you have parents who need to be cared for or young children that need more of your attention, you can always make use of the option to retire early or take a hiatus for some time. Some commitments are more important than others, and that’s when a life insurance policy can truly come in handy. A policy with a decent accumulated cash-value can help you find expenses at a time like this, and give you that much-needed breather without having to worry too much. Of course, this option is more feasible when the accumulated cash value is on the higher side, and also depends on the extent of your expenditure.

  1. Let your 401 K grow

As soon as you retire or are about to retire, it’s only natural for you to want to cash in on your retirement investment. However, when you have a back up like a permanent life insurance policy, you have the liberty to let you 401 K grow for a few more years before you cash it in. This is, of course, very beneficial in the long run and makes your retirement life a lot more financially secure. Retirement expenses can be quite unexpected, and having a solid fund to fall back on is more than necessary. The upside here is that your life insurance will also continue to grow side by side, as long as you can pay your premium.

  1. Health expenditure

If your health insurance isn’t going to cover a major expenditure that has cropped up, especially in the case of a chronic illness, then there are certain policies which allow you to cash in on your death benefit that would’ve otherwise only gone to your beneficiary after your passing. In such a case, whatever policy amount is leftover will be given to your beneficiary, while you can use as much as required to treat your serious condition. This isn’t a substitute for health insurance for sure, but it’s one of the more effective alternatives to add-on to your funds that you might require in such an unfortunate time.

  1. Buffer period

While you may or may not have the misconception that once you take up permanent life insurance, you’re stuck for good, we’re here to debunk it for you. Almost all life insurance companies give you that buffer period within which you can try out the policy, review its clauses, and even start and stop it in that time frame if you’re not happy with what’s being offered. Some companies might not give you this information because they don’t want to lose a client, but here’s a fact that you should definitely know!

  1. Online reviewing

Online reviewing

If you’re not aware of this fact, you’ll surely be thanking us later. New buyers of life insurance aren’t quite aware that there are sites and portals where you can review, assess and even compare one policy with another to see which one suits you best. Instead of having to run from pillar to post, gathering information from insurance agents, you can easily find most of the information online and even chat with agents online instead of meeting in person. This helps with saving time, energy, and also helps you make a more informed decision.

  1. Proper risk management

There’s a difference between financial management and risk management, although the two concepts might seem very alike. Essentially they deal with making the best possible use of your finances, but risk management is more specific to providing for those times of high tide and contingencies that you cannot be prepared for. Buying life insurance is considered one of the most important steps of the risk management process, and any financial advisor would urge you to invest in one as early on in life as possible.

  1. Term and permanent

Term insurance and permanent insurance are both forms of life insurance, but they work differently when it comes to time frames. Term insurance is taken for a specific term or period of time, and it covers for death that occurs within this time and has an expiration date as well. Permanent insurance, on the other hand, doesn’t come with a set timeline and functions purely on circumstance. It also allows the value of the policy to mature and grow until the point where you decide to withdraw, or death causes a beneficiary to receive the amount.

  1. Riders matter

You may or may not be cautious when it comes to additional riders and hidden clauses, so here’s news for you: there can be quite a few in terms of life insurance. Since different companies are allowed to play around with their riders and clauses, you can never assume that you fully know what you’re signing up for. Hence, the wisest thing to do would be to read each and every clause, ask all the necessary questions and also ensure that no one is giving you false information.

Final Thoughts

Has this information helped you? We truly hope so! Remember that life insurance is an absolute must for a secure financial future, and having all your facts right can truly aid with making this process simpler and more lucrative.

About Archi 59 Articles
Archana Singh is an independent finance and investment advisor since 4 years and recently added with Investment Pedia. User are welcome to put questions on her contributions.

Be the first to comment

Leave a Reply

Your email address will not be published.


*