Avoid being tricked : Know the fact that very few policies are actually low cost policy
Posted Oct 08 2010 2:10am
< p>Many life insurance agents must have approached you with what they called low cost life insurance policy. You must have succumbed to the temptation a few times. But, had they really been so low cost all the time? This is not to say that you have been cheated. May be they have given you handsome return on maturity. Then again, those, which were based on equity, did not give any worthwhile return during the recent financial meltdown. You had what you had paid for.
For all those who are looking for low cost life insurance that will provide steady coverage then buying the ones based on the equity is a strict no and the only reason is the unpredictable return that the policies provide. It depends upon the market condition in the booming market they provide excellent return and vice versa. These policies are meant for the ones who have enough money in the bank, who have regular insurance coverage and are just looking for the various ways to multiply their money. These policies are a combination of investment as well as death benefits but the death benefit that they offer is quite low and hence nobody prefers them to buy with the intention of insurance.
If you are looking forward to buy cost life insurance that provides adequate death benefit without fail then there are two options that you have:
Term life insurance: these policies are available at the lowest life insurance rates and the death benefit that they offer is comparatively high because the premiums that you pay buy nothing else but the death benefit. All that has some positive points will have some negative ones too same goes here as well, these policies come with a expiry period and if the policyholder outlives the tenure of the policy then you are subjected to no return. It is the profit of the insurer.
Non-participating whole life insurance: these policies are a small more expensive than the term life insurance policies. But if you are looking for a guaranteed return and one of those who feel cheated when they get nothing out of their term life insurance then this is the policy to be preferred. All the values such as premium, cash value, death benefit are determined at the very beginning. There cannot be any change and if the actuaries have underestimated the risk, it is insurer’s loss. He cannot transfer it to you.
Although I do not want to sound alarmist, I must say that there is more to buying a life insurance policy than is apparent. We must have low cost life insurance that we can afford and that at the same time covers us adequately and meets all our needs. Term life insurance is a low cost life insurance policy that we can buy for our total protection. But, we will then have to invest separately in some other saving scheme to build up our estate, for when the term expires we will need that to fall on to.
The cheap rates of term life insurance have made it further simple. If you are young and healthy without tobacco use, you can buy coverage worth of $500,000 for less than $40 a month. This makes things very convenient for you, you can place a regular amount in some other saving scheme so that by the time you are sixty-five, you are relaxed because you know the fact that your bank balance is excellent enough to take care of all your needs.
If but, you are not so methodical non-participating whole life insurance is another low cost life insurance policy you can look into. These policies were really conceived because of market pressure. Earlier all policies were term life. But, many policyholders were disappointed that they could be paying premium for thirty thirty-five years, but in the end they will not get any return out of it.
This is the reason behind the launch of these polices, to alleviate the feelings of the policyholders the thought of the policy that would be valid for whole of the policyholder’s life and would offer cash value, which will build up against the face value. This made the policyholders as well as the insurers pleased. The fact that now the policyholder gets a guaranteed death benefit whenever the policyholder dies and in the time of crisis he can take out the cash value by surrendering the policy or take loans against it made the policyholders very pleased. The reason why the insurers were pleased was because of the30% overcharge that was charged on every premium.
Now you see, why we say that the term life is the cheapest. If you are looking for low cost life insurance, buy term life and invest the difference in some other saving scheme. You will gain lot more if you go this way. If on the other hand, you are not so methodical or want to build your asset under the experts’ guidance, you can buy those investment policies that also provide death benefit. In that case, you can forget about low cost life insurance policies. The premiums you will be paying will certainly be overcharged.