What is life insurance for
Most parents know that they need life insurance. But many would rather have a root canal than shop for the best life insurance policy.
"People don't think about, 'What will my family do if I don't come home tonight?' " The whole point of this kind of planning is to provide the family with maximum financial options at a very difficult time.
Planning for your death is not a cheerful topic. Too often, parents make a quick decision, ignoring important considerations. Among their mistakes:
Not enough life insurance.
Families don't always insure a parent who is staying home to care for the children. "They don't think that the person who is not bringing in an income needs life insurance," says Greg Daugherty, executive editor of Consumers Union. But if that person dies, the other parent can't stop working and usually has to pay someone to help care for the family.this is What is life insurance for
You may not need to buy the same amount of insurance for both parents. There was a case where the recommendation was that they should buy $3 million for the husband who earns $100,000 a year and $1 million for the stay-at-home wife.
Relying on employer-provided life insurance.
Employer-provided coverage is rarely sufficient to support your family. Many employer-provided policies provide a death benefit of $10,000 to $25,000 — barely enough to cover your funeral expenses. Some employers provide a year's salary, but that may also fall well short of the amount your family would need to maintain its standard of living.
Some employers let workers buy group life insurance through payroll deductions. That may be a good deal for workers who have health problems that would disqualify them for an individual policy. But if you're young and healthy, you may be able to get a better rate.
Another drawback: If you leave your job, you may not be able to take your insurance. Even if you have a lot of insurance at work, it makes sense to have some more insurance on your own this is What is life insurance for
Too much insurance.
Not everyone needs life insurance. Some people buy life insurance for babies, which is unnecessary, unless the baby is a child model who is supporting the family. Single people and those who have no children to care for usually don't need life insurance.
If you are someone with substantial savings in stocks and bonds and other sources of income may not need very much life insurance. There are a few people who don't need life insurance but have it and many more people who need it but are woefully uninsured.
Investing in a weak insurance company.
Most people tend to look at the cost first, says Martin Weiss, president of Weiss Ratings, an independent provider of ratings for financial institutions. But it's also important to check the safety of an insurance firm, even if it's one of the largest, Weiss says. It's best to rely on an independent rater. What is life insurance for
Not being truthful on your application
Fibbing about your pack-a-day habit to get a lower premium probably won't work, says Amy Danise, managing editor of Insure.com. Smoking is "one of the easiest things to catch in the medical exam," she says. If you manage to get away with it and later die of a heart attack, your insurer could use your smoking history to deny your family's claim, she says.
It's hard to lie about many health problems, because insurers generally contact the primary physician and require blood and urine tests.
Don't fudge about your hobbies, either. If you die and your insurance company discovers that you were a long-term member of the sky-diving club, it may deny your family's claim on the basis of fraud, Danise says. Or it may reduce the amount of the death benefit, she says.
What is life insurance for
Content contributed by - Christine Dugas and Sandra Block, USA TODAY
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