Factors of Life Insurance Policies You Need to Know

Buying a life insurance policy is one of the best things you can do for your loved ones. Losing a family member is traumatic, and finding that there is no way to pay funeral and burial expenses adds to the devastating effect a death has on loved ones. In addition, if you leave behind a spouse or minor children, paying household expenses can be very difficult for them with the loss of your income. Buying a policy that pays out a lump sum to your beneficiaries after your death will enable them to pay off your debts and provide some money for them to live on.

The Policy

When you buy a life insurance policy, you pay monthly or annually for a certain amount of benefits. At the time of your death, whomever you've named as a beneficiary will receive a lump sum equal to the amount of the policy. The beneficiaries can do whatever they would like to with the money; however, if you have a will, you can state that your funeral expenses and debts are to be paid off prior to the remaining sum be divided among beneficiaries.

Choosing A Policy

When you choose a provider for your policy, you should take several factors into consideration. The face amount of the policy is, of course, important. You'll want to choose an amount that will cover funeral and burial expenses; in addition, you may want to consider other expenses, such as a mortgage or college tuition fees for your children. The premium is also a factor, as you'll be paying monthly for the rest of your life. Many life insurance policies have automatic cost of living riders, which increases slightly both the face amount and the premium each year to account for cost of living increases. As with any insurance policy, you'll want to choose the company that offers the most benefit for the lowest premium.

Shopping For An Insurer

You should put some time into choosing an insurer. If you have a homeowner's policy or car insurance, and you are happy with your provider, then checking with your agent about the possibility of buying a policy is a good place to start. You should also consider other options, as you may find a better policy with a company that specializes in life insurance. The internet is a good way to find an insurer; when you conduct a search, you will find many different companies offering policies. With many insurers, you have the ability to get quotes online so that you can compare quotes and find the best policy and insurer.

Risk Factors

Each insurer has a set of risk classifications that they use to determine the amount of your premium. There are several factors that go into determining your risk category, such as your age and your life expectancy based on your weight and medical history. Whether you smoke or not is also used as a factor in determining your risk category for your life insurance policy. Those at a higher risk, meaning that their life expectancy is shorter, will pay higher premiums.
This guest post was submitted by Chantille McDonald a writer from Australia who like to share with readers the benefits of insurance. She also likes giving readers a heads up about insurance websites like Real Cover.