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Insurance Buying Primer

Insurance is something that we all need, but really don't want. Yes we all want the protection, but who really wants to pay for it?

Keeping that in mind, when you do spend money to buy insurance, it is important to spend your money to protect against the greatest risks. The greatest risk that most people face is that the breadwinner in the family will unexpectedly pass away.

Think about it. You, your spouse, or life partrner, suddenly passes away. What will your partner and family do to pay the bills? How will your partner that is not the breadwinner find income to maintain their life style?

While social security does pay survivor benefits to qualified spouses, these payments are not nearly enough to support a middle aged person with 2 children, a mortgage, and a car payment.


Hint 1 - Keep it simple. Stay away from policies that combine different types of insurance in one ploicy.
When you are buying one kind of insurance e.g., life insurance, it is much easier to compare policies just for liability life insurance (also known as term life insurance), than it is to compare whole life insurance policies (which are a combination of term life policies and a savings account).

Hint 2 - Term life insurance is all you really need. Term life insurance is a policy that does nothing but insures your family against your early death. There are no savings components in it, as you are just paying for protection against early death.
It is also very easy to buy. You decide how much money you want your family to be paid upon your demise, and you go shopping for a trem policy that pays that amount.
About the only choice you have to make is the amount of time you want level premium payments

Should you cancel your whole life policy? Most of the fees for taking out a whole life policy are paid in the early years. If your whole life policy has a very low cash value, you should probably cancel it and just buy term life insurance. You will save much more more money by paying lower premiums, then you would ever earn form the savings portion of the policy.

Hint 3 - Paying as little as possible for insurance is not a good thing. As in most things, with insurance you get what you pay for. Companies that are struggling, or that have poor business practices may lower their premiums to attract new customers.
You definately do not want to do business with an insurance copy that is having financial deficulties. Which brings us to Hint 4.

Hint 4 - Insurance is only worth the paper it is written on. Insurance is a wonderful thing until the company that is providing your insurance goes out of business. Poorly managed insurance companies can go out of business and leave you high and dry clutching your now worthless insurance policy. Even if a struggling company does not go out of business, they may not be able to pay you when your insurable event occurrs.