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The Ten Golden Rules in Buying Life Insurance and getting
Life Insurance Quotes
By: Craig Lock
The following
TEN GOLDEN RULES apply to all life insurance policies:
1. Plan ahead carefully. Put as much effort
into thinking about designing your life, as in planning your next
vacation (we call it holiday, here in the old British "colonies").
2. Select your insurance company (or bank*
offering the retirement plan) very carefully. These days more and
more financial institutions are merging their operations and banks
are increasingly marketing life insurance products, which were once
the exclusive preserve of insurance companies. Don't buy a policy
from the first company to approach you. You may be committing 10%
of your hard-earned income for the next 30 years and this needs
careful thought.
Look closely at the projected investment
returns provided by your adviser. Remember that they are illustrations
only and are not guaranteed. Ask yourself, are the assumptions (
the interest yield) realistic in the long term? One company's figures
may be far higher than another; but they may be quoting at a far
higher interest rate than the competitor. Is one policy quoting
a value assuming premiums are inflation linked - the other not?
This makes an immense difference to the final payout.
For example: $100 a month paid in over 30
years with an average investment yield of 6% amounts to $58293;
while at 8% it will build up to $72485 - a substantial difference!
Also ,if you started a year earlier you will receive an extra $7200
+ by paying in an extra $1,200 (value $79747 at 8.0 %).
Besides your life
insurance policy, ask yourself, what else does the company offer
you? Some offer a full financial planning service, tax planning,
wills and so on. And what of their service to you as customer? The
initial commission paid to the agent is a payment for servicing
that policy over the lifetime of the plan . This payment is made
up front; however bear in mind that life insurance policies normally
last far longer than agents do!
A word of advice... * NB:
3. Select a salesman who you trust. This
is of vital importance in buying insurance. Incidentally, the word
insurance generally refers to general or short-term insurance (like
house, car,
boat), whereas insurance denotes
long-term or life insurance.
There are two types of insurance salesman:
agents and brokers: Agents can sell only for the company that employs
them, while brokers can sell for all companies withwhich they have
a contract. My advice... It does not matter whether you choose an
agent or a broker. The important thing is that you must fully trust
the person and feel completely at ease with him or her. You are
giving this person complete confid- ence as regards your personal
finances, your hopes and dreams. In turn , this person should come
up with an analysis of your most pressing financial needs. Then
they must explain all the technical details of your policy- the
solution to your financial problem. Then in the future they should
provide continuing service by sorting out any problems that may
occur and by regularly reviewing your insurance portfolio on an
annual basis.
Another word of advice...
4. NEVER BUY A POLICY YOU CANNOT AFFORD.
Peoples circumstances change - often drastically.
This is far more frequent these days with downsizing and redundancies
...and we mere mortal humans can't foresee the future. My advice:
just be very careful when taking out a new policy. Let the buyer
BEWARE.
5. START AS EARLY AS POSSIBLE.
Whether you are looking for insurance against
death, disability or illness , or you are saving for your retirement,
it always pays to start with your policy as early as possible. The
younger you are the cheaper the cost of your lifecover. In addition,
young people have a wonderful opportunity to start saving early.
It's quite amazing to see the effect of compound interest on a few
extra years... a huge difference at payout time (as we saw in the
example mentioned previously. The "magic" of compound
interest works wonders on your final pay-out!
6. ENSURE THAT YOUR PREMIUMS INCREASE WITH
INFLATION.
Most life insurance
companies offer the possibility of automatically increasing your
premiums every year. If your company doesn't offer inflation indexing
, make voluntary increases each year for as much as you can reasonably
afford.
If your premiums are not increased in line
with inflation, then you are effectively investing less each year
(in real terms, ie. terms of the purchasing power of your money).
7. ALWAYS GIVE COMPLETE MEDICAL INFORMATION
8. NEVER SURRENDER YOUR POLICY... unless
it's an absolute emergency and you need the cash value of your policy
desperately (but remember, you always lose out on surrendering a
life policy).
9. CHOOSE YOUR INVESTMENT FUND CAREFULLY.
Give some careful thought to it. What is your investment philosophy
and aim? Do you want to be conservative, or are you willing to "take
a punt"? Are you looking for a "high investment yield",
or a "safer" return. It's always a "trade-off"
between risk and return. STRIVE FOR BALANCE in your choice of investment
fund.
NB: Always remember that Life insurance is
a LONG- TERM investment. It is not designed to work like a bank
account- to draw out money whenever needed. Cancel early and you
will lose money. ... And don't draw on your policy unless it is
absolutely necessary.
And finally,
10. REVIEW YOUR LIFE
INSURANCE REGULARLY
A few words to end off...
A visit to your financial adviser is like
having your car serviced ; it doesn't necessarily have to be like
a visit to the dentist - Ouch (my friend Andy is not like that though)!
I hope this information has been helpful
and informative to you.
You can find more Life
Insurance Information here
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