Life Insurance Law
Before you purchase life insurance, you will want to think carefully about whether life insurance is right for you and which policy best suits your situation. Many people routinely purchase life insurance, but it may not be necessary in some circumstances. For example, if you have no young children or other people who are dependent on you, such as an ill or disabled spouse, you may not need life insurance. If you do have some dependents, but they are likely to become self-sufficient within a short time, life insurance may not be worthwhile. Sometimes your dependents will have other sources of income, such as Social Security benefits, private insurance, and income-generating assets inherited from you, in addition to financial assistance from relatives. You should calculate their likely living expenses and see whether these already would be covered without purchasing life insurance.
On the other hand, life insurance can help pay off expenses related to an individual’s funeral, the debts of their estate, and any estate taxes that may be imposed. It can help resolve any immediate financial needs in the wake of your death. The probate process tends to be protracted and complex, so life insurance may be useful if much of your estate will need to pass through probate. (Life insurance will not pass through probate unless you name your estate as the beneficiary of the policy, which you should try not to do.) If your estate contains many non-liquid assets, such as real estate and business property, you may want to purchase life insurance to avoid the need to sell these assets soon after your death. Selling them to pay the immediate bills may result in selling them for less than what they are worth.
Working With a Life Insurance Agent
If you decide that you want to purchase life insurance, the first step is to evaluate the prices of various policies. You will find that different companies and brokers charge different rates and commissions for similar coverage. Then, you will want to decide whether you will buy the policy of your choice from the insurance company directly or whether you will get assistance from an insurance agent. You should understand the difference between salespeople and brokers. Salespeople sell for only one company, while brokers sell for several companies. While a broker might seem to be a more attractive choice, you will want to choose an agent who seems trustworthy and candid about the options. They should not subject you to pressure or urge you to add unnecessary extras to a policy. If a term policy meets your needs better than a permanent policy, you should be suspicious of an agent who keeps pushing you toward a permanent policy once you have explained your preference.
When you are looking for an agent, you should ask friends and family members for references. You should make sure that the agent has a valid license in your state and is not facing disciplinary proceedings. If they have had several complaints filed against them in the Better Business Bureau or other consumer organizations, these may be a red flag. You should discuss your situation with various prospective agents before determining who is the right fit for you. Your agent should show interest in your personal needs and preferences rather than just pushing you toward a policy.
Evaluating Insurance Companies
You might not be aware that insurance companies may not be as stable as they seem. If an insurance company is facing significant difficulties or goes bankrupt, you may face the daunting prospect of losing much of the money that you invested in the policy. Almost all states provide a guarantee fund for this situation, so you probably would not lose everything. However, it will take time for the state government to take control of the insurance company, examine the details of the situation, and distribute funds to policyholders.
Instead of relying on a state guarantee fund, you should try to prevent this situation in advance by getting assurance that your insurance company is stable. You can review moodys.com, ambest.com, and similar sites to see the ratings of each company.
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