If you find
yourself living
paycheck to paycheck every month, the last thing
you need is an unnecessarily expensive life insurance
policy. Life insurance salespeople or “financial
advisors” as they now call themselves, make a
living off of selling you the most expensive policies
they can get you to buy. There are certain laws to protect
you from worst case scenarios, but you can save a lot
more money with the following guidelines:
Do your research. Just like buying
a car, you never want to pay the whole “sticker
price” on your policy. Everything is negotiable.
Look up and compare whole and term life. You will see
a wide range in prices for the same policy coverage.
While you want your insurance to be inexpensive, also
make sure you pick an A rated carrier that has been
around a long time.
Find out what your current limits
are if you have insurance through your employer. As
a general rule you should have $250,000 - $500,000.
On average employers only provide $50,000 coverage if
they do at all.
Term
life insurance is cheaper and a better deal. Don’t
buy whole life insurance. Whole life is insurance with
a slight savings/investing mix. Salespeople get their
big paydays when you sign up for whole life. Your first
year’s premium and 3 to 4% thereafter goes to
commissions. Therefore, you won't see much in growth
for 15 to 20 years. You would do 10 times better with
any good mutual fund. Don't be fooled by claims that
your investments are tax free. They are not tax free,
and due to extremely high commissions you won't ever
see much growth. The only reason to have whole life
is if you are 60-65 years old or above, or if you are
extremely wealthy and want to use it to pay your estate
taxes when you die.
If you are going to hire a financial
advisor, hire a fee-based financial advisor. They will
not push loaded funds and are truly interested in your
benefit. They want you to succeed and give them referrals.
Get
educated - you can never have too much education
(whether it be formal or informal). Find out what your
coverage is. Do not buy whole life! And get a fee-based
financial advisor. You will be glad you did!
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