Follow Good Advice When Buying Life Insurance

When you are looking to purchase life insurance and/or annuities, knowing what you are doing ahead of time will certainly go a long way in giving you a better deal.

The first thing to do is know what you need before you sign your name on any dotted lines.

The main reason for purchasing life insurance is to protect your family in the event you pass away. Life insurance can also be purchased to pay estate taxes.

It is important to look at the number of people, who are dependent upon you financially, and if you will have substantial debts and taxes owed following your death. It is also important to look and see if you have alternatives that would take care of a portion of these expenses.

Keep in mind that business relationships often necessitate life insurance or can benefit from it.

Those looking to purchase life insurance should beware of any individuals trying to sell them life insurance as an investment.

At the end of the day, life insurance should be acquired for the protection it will give the individual, and at least a portion of the premium pays for that protection.

For those unaware, annuities offer individuals a secure way to make sure they do not outlive their income.

Annuities provide the individual with a regular income; either right away or somewhere down the road, for a specified period of time or for as long as the individual lives. Interest earned on an annuity will be tax-deferred until the time it is actually withdrawn, either as a cash withdrawal or as a portion of periodic payments. Most of the time death benefits will be available to the beneficiary.

Term or Whole Life Insurance for Me?

For the individual looking at life insurance, many experts will say that term insurance is the way to go.

The bottom line is that term is different from "whole life" or "universal life" in that the person does not build up equity, or cash value. In term, the individual just pays for the cost of insurance based on their age. The majority of term policies are renewable on an annual basis, and premiums typically go up annually. A number of them have level premiums or a decreasing death benefit for a stated period -- one, five, or 10 years, or even to a specified age.

Whole life insurance, meantime, is typically sold with a level premium.

In the early years of the policy, the annual premium will be larger than comparable term insurance; but due to the fact its premiums are level, premiums may eventually be less than term. Whole life policies build up a cash value that consumers can remove or borrow against.

Premiums may be payable for a specified number of years on a limited-payment basis. Consumers also may have the chance to go for a single premium -- paying all of the premiums at once with a single lump sum.

Consumers should be careful of any life insurance plan that touts "vanishing premiums' or a premium-free policy over a specified period, given that there are no guarantees that the premiums will go away.