Five Questions to Ask When You Compare Insurance Policies and Prices

Five Questions To Ask When Comparing Insurance Policies & Prices

July 14, 2020Insurance

At The Comparison Company in Dallas, TX, we understand how important it is to compare insurance to get the best deal while protecting your family. This is why we want to help you compare quotes and pick the best company for your unique situation.

1. How Much Insurance Do I Need?

The first step is to figure out how much insurance you need. You do not want to compare one policy that only offers $10,000 in protection to a policy that provides $1,000,000 in coverage. The terms and prices would be too different for a good comparison.

The rule of thumb for determining how much insurance you need is to take your annual income and multiply it by ten. This is a nice, safe amount to add to your policy that will protect you when things go wrong and to have for your death benefit for those you leave behind. When picking insurance, ask the agent what obligations and assets are used to reach the amount they recommend. Then do your own math to see if this adds up.

2. How Long Should I Have the Insurance in Force?

There are two main types of life insurance you can choose from: permanent or term life. A permanent policy will provide coverage for your entire life. Term life insurance is shorter and only lasts for the term you buy. Most term life insurance policies often last between twenty to thirty years.

Permanent life insurance is nice because it can cover your whole life and never runs out. The policies are more expensive though. Term life often goes for long enough to make most people comfortable while also providing a lower cost each month.

3. What Happens to the Policy If I Can't Pay the Premiums?

With a term life insurance policy, when you stop paying the premium, the insurance coverage will stop too. If you purchase a permanent life insurance policy, you have the option to pay in the future once the policy has some cash value. You can use that cash value or the dividends you earn to pay the premiums.

Some insurance companies provide leeway on missed premiums. This will be outlined in your agreement. If there is some reason you can't pay your premium, then take a look at the contract to see what will happen to your policy.

4. How Well Will My Policy Perform?

If you purchase permanent life insurance, you should know that your policy will have a cash value component. Your insurance company will invest that cash component for you. Unless the returns are guaranteed for you, the future value of the policy is just a lucky guess.

Your insurance company should present you with two illustrations. One is the guaranteed illustration, showing the minimum amount your cash value will be when you pull the money out. The second is a hypothetical illustration that is based on predictions with no guarantee. Do your comparisons on the guaranteed illustrations.

5. Can I Use the Policy for Other Potential Problems?

This depends on the insurance policy you pick. If you purchase permanent life insurance, it is possible to fill in other needs using that policy. You will not be able to use the policy to fund a big vacation, but it can be used to help with retirement planning or long-term care insurance.

Using It to Supplement Retirement Income Permanent life insurance can be used to help supplement your retirement income. This is a strategy that most advisors will not recommend unless you have maxed out other retirement savings. Some life insurance policies offer long-term care riders and other methods that help fund stays in a nursing home.

Adding Riders to the Policy It is possible to use riders to stretch out the benefits of your life insurance. An accelerated death benefit rider will help cover any medical needs that require long-term care. When this is necessary, the policy will pay out a portion of the death benefit when you are injured or ill. This leaves less money when you die but can help you get through a tough time when money is short.

Another option is to do a waiver of premium rider. This is useful in case you ever become unable to work. When illness or injury strikes and you need to be off work, this rider will help you still bring in some income to pay the bills.

Comparing Life Insurance Policies Taking the time to compare insurance companies is the best decision you can make. There are many life insurance policies out there. Knowing which one will provide you with the security you want can help make the decision easier. Check out who we think are the top 5 life insurance providers in Dallas, TX to make it easier to look at many different life insurance policies at once so you can pick the one that is right for you.