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Life Insurance

Life Insurance Essentials – What to Consider?

Before you purchase life insurance and jump right in, this guide will provide you with some essential information to get started.

The need for life insurance.

Most Americans are not independently wealthy enough to support their family members after they die - they simply do not have the financial resources to do this. Outstanding mortgages, college debt, loans, even funeral costs, can place a heavy burden on your family and loved one's after the death of a bread-winner and provider. There are so many things to consider.

The starting point in planning life insurance needs must be a detailed assessment of financial requirements for your family and dependents. Write it all down and make a comprehensive list. Discuss this with the key stake holders.

After you have a solid understanding of your needs, then look at the different life insurance options available to you. At this point you will have a solid platform to work from and have your agent shop around for the best plan. Also, together with your agent, you will be then be able to make an informed and considered decision that maximizes benefits with affordability.

Consider the following:

    • Define your stage of life. For example, do you have young children? How many years until they reach college? College plus mortgage plus other debt? This will help you distinguish what type of life insurance you need - term life or whole life. Typically, it makes sense for younger families to purchase term life which is much more affordable and can provide greater death benefits, and then switch to whole life in later years.

 

    • Circumstances can change at any time. As we go through the stages of our lives (marriage, children, buying a house etc.) our security needs change. Build this in to your financial planning needs. As far as possible, try and avoid being underinsured.

 

    • Determine how much coverage you need. The best way to do this is to calculate your family's monthly expenses after your death and be sure to include tuition and mortgage expenses. Be very thorough with your list! Then determine if the lump sum death benefit will earn enough to take care of these expenses together with one-off expenses (for example, funeral costs).

 

Insurance state by state.

The insurance industry is highly regulated for good reason - a life insurance contract is one of the most important assets you could own. The table below provides links to each states insurance regulatory authority and contains useful information.

Free look period: When buying a life insurance policy most companies provide a 10-day cancellation provision without penalty. Some companies provide up to 30 days. This means that if you change your mind and do not want the policy (even though you have signed documents) you can cancel within the specific time after having received the policy.

Grace Period: Most states require that you have a 30 day grace period for late payments in order for the policy to remain in force and to avoid cancellation.

 

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