Life insurance policy rates are determined by insurance company actuaries. They use mortality tables and other statistical information to determine the actual rates. The insurance shopper is usually oblivious to life insurance rating procedures, but there are a lot of factors that you can evaluate before making a purchase. The purchase of life insurance has to have some planning in order for it to be effective and meaningful. There is a lot of life insurance purchased that eventually lapses because the need was not clearly defined from the beginning. This can cause repeat purchases, negating the advantage of keeping a policy in force. Permanent life insurance accumulates a cash value over the years, so it is particularly harmful at times to surrender your policy and start over again.
Things to consider
1. What is the purpose?
This is the most important question that you will ever answer before you purchase life insurance. You need to be very clear on the purpose of the life insurance, or you will allow the policy to lapse when your budget needs relief. There are multiple needs for life insurance, so it is important to do some kind of needs analysis so that you are satisfied with the amount and type of life insurance that you purchase.
2. What kind of life insurance do you need?
Once you have determined your needs, it is a good idea to budget a certain amount of money for life insurance. This is important because it will help determine how much permanent or term life insurance to purchase.
3. What Kind of Service?
Some people want to buy life insurance from an insurance agent because they want the agent to service the policy and keep them up to date on future needs. There is an increasing number of people who do not want an agent and prefer to do business over the internet or by telephone.
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