Understanding the pitfalls of life insurance

Life insurance is a good thing to have, especially if you are running a business or are earning a good salary from a reliable company. However, you may end up having more problems if you do not understand the entire coverage or skip the fine print. It is important that you know the possible risks to make the right choices that will give you security.

Price Disadvantage

Cost is among the most common pitfalls of life insurance. A lot of guaranteed life insurance policies are made to support funeral expenses only. Most policies actually do not provide benefit values higher than $15,000 to $20,000. These policies are quite expensive since the insurance company only has to base the premiums on the gender and age of the applicant.

Because of this, a lot of individuals may be paying the insurance company more in the premiums they applied for than the death benefit of the plan. It means that the insurance policy does not even perform better compared to a savings account. Currently, the National Association of Insurance Commissioners is trying to alleviate the problem.

Paying More Than What You Deserve

Graded benefit periods is a feature in guaranteed life insurance policies wherein the insurance company keeps itself protected from individuals who want to apply for insurance while having only a possible short time to live. There may be indications in the policy that if the person dies within a certain period of time after the policy is provided, the insurance company will only be responsible for paying the premiums, and interest accrued to the applicant. Further financial support will not be given.

It is recommended to get a thorough physical exam and medical check-up first to determine if you are eligible for traditional insurance. If you become eligible for traditional insurance, you may discover that you need to pay less to get more benefits compared to getting a guaranteed life insurance policy. Guaranteed life insurance becomes a good alternative if you find it difficult to apply for other policies because of your age or current health condition. A financial advisor will help you determine and find other possible options.

Stringent Requirements

Insurance companies actually have the right to refuse coverage to individuals who appear very unhealthy or have conditions like obesity, diabetes, cancer, tumor, etc. There is actually a very long list of conditions given to insurance agents to turn down individuals should they have one or more of the given items on the list.

Middle-age individuals have to pay more for term life insurance, compared to younger applicants. The cost of renewable term life insurance may also be higher than a standard policy. The policy, however, can be renewed without the person having to go for a physical exam. There are also policies that require new medical records each time you wish to renew the policy.

Young adults have a better chance of getting reliable security by investment in permanent life insurance than term life insurance. Permanent life insurance will insure the person until the time of death, so it never expires. After the premiums are set, these can no longer change regardless of changes in the person”s health status, weight or age. Permanent life insurance will cost more for younger individuals, but term life insurance will cost more for middle age people.

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