Seven Things Life Insurance Companies Don’t Want You to Know
You could study life insurance for years and still not fully understand all of its details. Unfortunately, that level of complexity plays right into the hands of modern life insurance companies, who sometimes bank on the fact that many consumers find the entire concept overwhelming. When you are shopping for a life insurance policy, taking the time to understand at least some essential life insurance details that your sales representative might not tell you can help ensure that you make the right decision for your family’s financial future.
# 1: Sometimes a Permanent Policy Benefits the Sales Rep More Than You
Term life insurance only lasts for the length of time designated by the policy, but whole life insurance and similar permanent policies will last for as long as you continue paying for them. However, not only are permanent policies far more expensive than term policies, they also tend to include a variety of additional fees and costs that term policy owners do not have to pay. Naturally, life insurance sales representatives generally receive a much higher commission for a permanent life insurance policy.
In some cases, buying term life insurance and investing the difference between its cost and that of a whole life insurance policy will leave you and your heirs with more money than buying the whole life policy on its own. That is not to say that term life insurance is always a preferable option, but simply that you should carefully study both your own needs and the details of the policies you are considering before you decide. Do not take what the sales representative tells you at face value.
# 2: Not Everyone Needs Life Insurance
If you are like many people, the idea of not buying life insurance might never cross your mind. It is true, of course, that buying some form of life insurance is often a wise precaution, but that is not necessarily the case in every single situation. For example, if you are largely debt-free and have been able to save up enough money to cover the cost of your funeral and similar estate-related expenses, you may find that simply insuring yourself could be a preferable option.
# 3: Riders Can Be Wildly Overpriced
Most modern life insurance policies are relatively simple in their coverage. However, when you purchase a policy, most insurance companies will offer you a wide variety of different riders, or additions to your policy. These riders can vary from a premium waiver to a “replaced income” feature. In many cases, though, these riders will cost far more than they are actually worth. Their cost would often be better invested elsewhere.
# 4: Life Insurance Premiums Are Not Tax Deductible
Many people assume that the monthly payment for their life insurance policy will turn into a deduction on their taxes each year. Unfortunately, for most people that is simply not the case. That does not mean that regulations will not change someday to allow more people to deduct the cost of their life insurance on their taxes, but except for in a few unique exceptions, that is not yet an option.
# 5: Initial Settlement Offers May Be Lower Than the Amount Owed
If you are a beneficiary on a policy taken out by a relative, a representative of the life insurance company will often urge you to move on from the tragedy – which to them, of course, means signing off on the company’s initial settlement offer on the insurance policy. However, if you study, the details of the policy taken out by your relative, you may well find out that you are actually owed significantly more than the company’s offer. In some cases, you may need to secure the services of a lawyer who specializes in life insurance claims to make sure that your relative is not posthumously defrauded.
# 6: Life Insurance Companies May Not Track Down Your Heirs
Believe it or not, paying your premiums on time each month may not ensure that your heirs receive the agreed-upon payout on your life insurance policy after your death. In fact, many different insurance companies are currently under investigation for failure to pay owed benefits in cases where the heirs did not file a claim. To ensure that your family is not victimized in this manner, make sure that all details on your life insurance policies are easily accessible by your heirs, giving them all the tools they need to make sure your family receives the benefits for which you paid.
# 7: Sales Representatives May Not Volunteer Discount Details
Individual who are in good shape and who live a healthy lifestyle will often qualify for significantly lower life insurance premiums compared to less healthy individuals. However, that does not necessarily mean that a life insurance sales representative will volunteer this information when you are choosing a policy. If you do not see details on a non-smoker discount and similar health-related discounts on the paperwork for the policy you are considering, you should remember to ask about them before purchasing.
Which type of life insurance policy do you prefer?
U.S. News & World Report: “3 Things You Should Know About Life Insurance”
FBIC: “Ten Things About Your Insurance That Your Insurance Company May Not Want You to Know”
MarketWatch: “10 Things Life Insurers Won't Tell You”
Consumerist: “15 Things You Need to Know About Life Insurance”
LearnVest: “10 Things We Bet You Didn't Know About … Life Insurance”
WiseBread: “14 Things Insurance Agents Don't Want You to Know”
QuoteWizard: “20 Things You Need to Know and Consider Before Buying Life Insurance”
AOL: “Trade Secrets of an Insurance Agent: 8 Things Insurance Companies Don't Want You to Know”