To get the winning policy and not to overpay for it can turn to either simple or extremely difficult task.
Insuring own life is one of few businesses where the salary of its agents depends on their commission payments for up to 80 percent.
Insurance businesses really pay their employees huge commissions of each sold whole-life police - nearly 80 percent of the person’s payment for the first year is paid to the agent. Moreover, the agent usually gets a premium for this policy five more times. For comparison, the commission for the term policy usually makes up 10 percent.
So, it’s not a surprise that agents are selling whole-life policies as if their well-being depends on it, and it actually does. If these policies were profitable for customers, this article would stop here. The most part of those who require insurance should order whole-life policies.
Nowadays, insurance premium for a $500,000 term policy is nearly $500 per year if the consumer is a healthy male, 40 years old and doesn’t smoke. The annual premium for the same policy could be equal to $260 for a healthy woman of 30 years old.
Awhile ago it was impossible to get term policies with insurance charges for terms longer than ten-fifteen years. Nowadays it’s easy to get term policies for 20 and 30 years.
Insurance agents can tell their clients that policies with such long terms are rather profitable as they are kept for life and enable their owners to store money without any taxes and even borrow them.
These are the facts but agents usually drop details about high payments and fees for the rest of the life as well as huge surrender charges (for those who refuse the policy) that can easily leave the customer without money after five, ten or fifteen years he has got the policy.
An idea of cash storage free of taxes isn’t unique anymore, because such organizations as IRAs, 401(k)s and others offer storage with tax advantages and small commission payments, greater profits and complete mobility.
The question of the amount of coverage is not a simple one.
According to some experts’ opinion the amount of insurance should be equal to customer’s salary for 5-7 years. Those who have young children or significant debt should increase their coverage to ten years of their salary. For example, a person earning $50,000 per year should have the coverage of $250,000 - $500,000.
Consumers should know that
life insurance has only one aim - to allocate revenue in case of one's death - and enable the relatives to keep living the same way.
Life insurance factors influencing the amount of coverage take into account the situation when the other partner has to raise children when the second one dies. Does the customer have other resources on which to draw? Are customer’s children going to leave the family soon? These factors as well as many other are considered to make a decision on the amount of coverage for the consumer.
A person who bought a policy for the whole life in not necessarily insured for 100%. Policies need payments for the whole life, so they appear more costly than the final compensation. When buying the minimal coverage, a person refuses from the main purpose of insurance - to provide relatives with money.
