Why You Need to Take Out Life Insurance

Expect the unexpected.

 

It’s important to remember that certain situations in life can occur and they can really take you by surprise. Fortunately, there are certain things that you can do to protect yourself from unforeseen incidents or scenarios.

 

One option is to take out insurance policies.

Cheap Insurance?

There is no such thing as “cheap” insurance.

Why, then, do you see so many ads about “saving money on XYZ insurance?”

Consider this explanation and draw your own conclusions…

First, understand that insurance is one of the most heavily regulated industries, and each state has detailed rules about how insurance is offered, priced, and sold to consumers. Second, insurance companies hire more college math majors than just about any other industry.

Why?

Insurance is all about risk and probability, and these factors are evaluated by math majors- who become actuaries. Take car insurance, for example. The insurance company has a pool of people that are sold car insurance, and the premiums generated each month are supposed to cover insurance claims,  business costs, and generate a profit.

What’s the risk that someone in the pool will have an accident? It’s based on historical data, probability, and other math calculations.

Given the heavy regulation and math component, there really isn’t “cheap” insurance- only insurance that covers less, or pays out less often. That cheaper insurance policy you see advertised may not cover all of your car’s damage if it’s totaled- only up to a dollar amount.

It’s not cheaper, it just pays out less in claims.

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What Is Life Insurance?

 

A life insurance policy will ensure that your dependents receive a payout should your life be cut short, and this can be used to tide them over until they are able to provide for themselves. You can find out more about this here.

 

Choosing the Right Policy

 

Choosing the right policy to suit your needs is likely to be a long and drawn out process. But don’t try to cut corners. This is an important agreement that you will be entering into, so taking time to look through the details will benefit you. Scour the web for different policies and consider using price comparison sites to choose the most affordable option for you.

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Low Deductibles?

 

Getting the balance right between premiums and deductibles can be difficult. Many people do not realize that they can adjust the features on their policy to reduce the amount of money they pay per month. If you set your deductibles at a higher rate, this means that your premiums will be lower as a consequence.

 

For those who are unaware, your deductibles relate to the amount that you need to pay before an insurer will pay out. Therefore, you also need to make sure that this is an amount you can afford.

Gritty Details

You should never sign a contract without reading each and every word of the policy, and without fully understanding the terms and conditions and the full implications. After all, there are a lot of insurance plans that come with hidden fees and terms that you really need to know about.

These terms come back to bite you if you are not careful, so make sure you read the details. Take as much time as you need to find the right insurance plan for you. It may take more time, but it will definitely be worth it in the end.

What About Payments?

 

Make sure to keep up with payments, because if you miss payments, your policy may be void. Consult your provider for more information on this subject.

 

As you can see, taking out a life insurance policy can be extremely beneficial for your loved ones. So, take a look at your options carefully.

This post is for educational purposes only.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/

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