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How Do I Get the Best Price for My Insurance Policy?

Even as downsizing and consolidation afflict other segments of the financial sector, the market for term life insurance has become increasingly competitive. This is good news for consumers; policy premiums continue to drop as actuarial models improve and life expectancy increases.
Then again, the sheer variety of available term life insurance policies presents the average risk-management shopper with a baffling buffet of coverage options. As of 2011, there were over 900 life insurance companies in operation in the United States. The combined value of their underwritten policies approached $19 trillion, a staggering sum that exceeds the value of the country's gross domestic product by several trillion dollars. (more…)

When you apply for life insurance coverage, the insurance company is going to look at a dozen different factors to determine how much they are going to charge you every month for your life insurance. All of the different factors are going to play a huge role in your premium amounts.
Life insurance rates are determined not just by an individual's health but also by his or her age, occupation, sex, lifestyle factors and financial status. Insurance underwriters use these risk factors to place each applicant into a risk class. If an applicant dies before his or her policy matures, the company will take a loss on the policy, so those who are applying for policies with higher face values will be more likely to have their health scrutinized more closely.
One of the most common reasons that people don’t get life insurance is because they assume that a policy is going to be too expensive because of their health. In most cases, that couldn’t be further from the truth. Regardless of your health, there are several options for affordable coverage. (more…)

The number of American life insurers has fallen rapidly in recent years, declining by more than 50 percent from the industry's late-1980s peak. Nevertheless, there are still nearly 1,000 agencies operating in the United States today. Thanks to brutal competition between insurers, life insurance shoppers have a dizzying array of seemingly interchangeable policies from which to choose.

Whole Life Insurance vs. Term Life Insurance

The differences between whole life insurance and term life insurance are well-documented. The former is typically regarded as an investment vehicle best suited to supplementing a tax-deferred retirement account. The latter is generally more affordable and confers a greater return on investment if the policyholder dies during the specified term. Its relative cheapness and flexibility drives many consumers to choose term life over whole life.

Should You Add on Supplemental Coverage?

Many term life policies offer "riders," which are supplemental coverages that require policyholders to pay additional premiums. Many of these riders mimic the cash-value benefit of whole life insurance by specifying situations in which all or a portion of a policy's death benefit may be paid out before the policyholder dies. This is typical in cases of acute or terminal illness: As their medical debts pile up, beneficiaries often cannot wait to receive death benefits.
Some term life insurance policies have coverage gaps that may escape the notice of careless prospective policyholders. These may take the form of "exemptions" for which the insurer waives its obligation to pay death benefits and commonly include suicide, some forms of accidental death, "suspicious" deaths that may involve foul play, and fraudulent death claims. With the exception of the last exemption, there are often ways to guarantee coverage for these types of circumstances. For instance, many term life insurance policies offer an accidental death rider.

Designate a Beneficiary

Properly designating a life insurance beneficiary is just as important as securing adequate coverage. Most policyholders designate their surviving spouse or an adult child as their primary beneficiary. Since federal law waives the estate tax on benefits that pass to a surviving spouse, the former option may be the most tax-favorable.
In addition to the primary beneficiary, who receives death benefits once the policyholder passes on, most experts recommend selecting secondary and final beneficiaries as well. Secondary beneficiaries continue to receive the policy's death benefits after the primary beneficiary's death while final beneficiaries, who may be distantly related to the policyholder, receive whatever remains after the secondary beneficiary dies. Alternatively, it's possible to name multiple beneficiaries to receive a policyholder-determined percentage of a policy's death benefit.

Not Purchasing Life Insurance May Put Your Family at Risk

Individuals who fail to purchase some form of life insurance may be putting their families at risk. If an uncovered head of household's death occurs after a lengthy illness, their family may be forced to take drastic steps to retire their medical debt. These might include taking out a second mortgage, selling their home, or even declaring bankruptcy.
Depending upon the life stage in which an uncovered individual dies, they may also leave their family with no means of paying for expected future obligations. Life insurance provides grieving families with a tangible income stream that can be used to pay for education, weddings, new homes or simply to cover household expenses. Many surviving spouses with young children elect to receive death benefits as an annuity to ensure a long-term income and avoid having to work full-time outside of the home.
 

Like most auto insurance products, traditional term life insurance policies confer payouts or refunds to policyholders or their beneficiaries only if certain conditions are met. In the case of auto insurance, policyholders looking for compensation must be able to demonstrate that the covered vehicle has been damaged, destroyed or lost. For their beneficiaries to receive death benefits, traditional term life insurance policyholders must die within the specified term of their policy.
Whereas most auto insurance policies must be renewed each year, term life insurance policies tend to last from 10 to 30 years. Since they aren't guaranteed to pay out, term life products are substantially cheaper than whole life insurance products, which cover the insured over their full remaining lifespan. Even so, most term life policyholders outlive their contracts and forfeit any premiums that they paid to keep them in force.
Return of premium life insurance exists to  mitigate the disappointment  that many traditional term life policyholders feel when they realize that they've outlived their policies and spent thousands of dollars that can't be recovered. Today,  5 to 10 percent  of all term life insurance policies offer this form of protection.
Since insurance companies must guarantee themselves a profit on most of the policies that they write, return of premium products cost more than traditional term life insurance policies. Insured parties can expect to pay anywhere from 30 to 600 percent more over the life of their return of premium policy. Their underwriters invest these additional premiums over the policy's term, often earning a substantial rate of return on the funds.
For this reason, longer-term return of premium policies tend to be far cheaper than short-term policies. After all, reinvested 10-year policy premiums have far shorter periods in which to grow relative to 30-year policy premiums. According to AccuQuote, a leading term life insurance policy aggregator, a 30-year return of premium policy may cost just 45 percent more than a traditional policy of the same term. On the other hand, a 15-year return of premium policy may cost 600 percent more than its traditional counterpart.
As an investment, return of premium life insurance offers mediocre returns. According to a  USA Today study, policyholders can expect to earn anywhere from 2.5 to 9 percent more per year versus a traditional term life policy. However, this statistic can be misleading because return of premium policies don't add interest payments to their returned premiums. If they outlive their term, the best result for which a policyholder can hope is to break even in absolute terms. In real terms, their returned premiums will likely be worth less than their initial value thanks to the effects of inflation.
Return of premium life insurance offers some benefits. Whereas traditional term life insurance merely reassures its policyholders that their family members will enjoy some financial security after their passing, return of premium insurance ensures that they have something to show for their foresight. It's also far more affordable than whole life insurance, making it an attractive choice for families on a budget.
Return of premium life insurance has some drawbacks as well. Since it offers a negative rate of return in inflation-adjusted dollars, it compares unfavorably to many other types of investments. What's more, insurers may charge extortionate fees on policies that are canceled early.
 

Determining whether you need life insurance is easy. Unless you're nearing retirement and have a great deal of personal savings stowed away, your family needs some amount of protection.
However, determining exactly how much insurance to buy can be a complicated affair. While some experts insist that a life insurance policy equal to 10 times your annual income will be adequate to protect your family, your individual calculus may vary according to multiple factors.
In short, you will need more insurance if you are your household's sole earner, you have younger children that plan on attending college, or you have significant amounts of personal debt that your family will need to pay off upon your death. If you need guidance, use an online life insurance calculator.

First, Let's Talk About The Cost Of Death

If you plan to be buried, there are a variety of factors to consider. You will need a casket, among other things. The average price of a casket was about $2000 in 2012. A quick internet search brings up astonishing prices, including the “Mahogany Masterpiece” costs more than $17,000!
The funeral home typically has a lump-sum package that starts around 0. This price includes mortuary care, labor costs, and transportation costs. Things like weekend services, multi-day wakes, and open caskets cost extra. Memorial services in general can cost up to $4000, and cost more when they occur in churches since the minister and the church can require hourly payment and rent. It's also important not to forget fees such as the organist and tips.
Depending upon your religious preferences, embalming is an additional cost, usually around $200 - $700. This does not include washing, dressing, and cosmetically preparing the body and placing it into the casket.  This can cost an additional $95 - $400.
There are also costs associated with the burial itself. You will need a burial plot, which averages between $200 and $900. Premium spots in some areas can even rise as high as $2000. These figures were for public cemeteries, however, and private plots are even pricier with averages around $2000 - $3000. Don't forget accessories: a lawn crypt is another $2000 - $12,000, and a grave marker starts at $250 - $600 for a flat one or $1000 - $3000 for an upright marker.
Beyond the direct costs of a funeral and burial, there are also other smaller costs to consider. Many people opt to choose floral arrangements, and a variety of online florists claiming to offer the best deals. You also will need to notify frienda and loved ones of the proceedings. Some newspapers charge flat fees and some charge by the line for obituaries. There are also thank you cards, announcements, booklets, and other things you may not have even considered.
Of course, if you choose to go with cremation, it can cost as little as $800, minus the price of an urn. Urns can be brass, wood, or marble, and come in a variety of styles and prices. For example, a Colonial Clock Cherry Urn will run you $399.95 with free shipping.
As you choose the amount of life insurance that is right for you and your family, please consider the fees associated with your death. Relying on social security will not get you very far. They pay a one-time lump-sum death payment of $255, which will probably not even cover the cost of flowers.

Be Prepared to Consider Future Expenses

Before arriving at a final number, shoppers must consider their family's future expenses. Education is often the most burdensome of these: Putting even one child through college may cost upwards of $100,000 in today's dollars. Fixed costs like mortgages, car loans, and health insurance plans must be taken into account as well. Smaller but still-significant costs like fuel and utility bills shouldn't be overlooked.
If there are small children in the house, it may be unreasonable for a policyholder to expect their spouse to be able to work full-time and take care of the kids simultaneously. Policyholders with young dependents should increase their premiums to account for this additional loss of future income. In many cases, life insurance shoppers may benefit from using a third-party life insurance calculator.

How Can I Determine How Much Coverage I Need?

Depending upon the demographics of their clientele and their own personal opinions, financial advisers may recommend one of several formulas for determining adequate life insurance coverage. One of the simplest is the income-multiple formula: Using this technique, life insurance shoppers simply buy enough coverage to replace their pre-tax earnings for a specific number of years.
Some experts within the life insurance industry insist that eight to 10 years of income replacement is necessary. On the other hand, many financial advisers who advocate frugal living recommend purchasing coverage for just five to seven years and building up a nest egg on top of that.
However, these rules of thumb tend to overgeneralize. In order to avoid paying high premiums for coverage that they don't need or purchasing inadequate coverage to save on premium payments, life insurance shoppers should consider their individual needs before settling upon a specific policy.
Of particular importance are the potential policyholder's age and lifestyle choices. Relatively young life insurance shoppers who remain in good health may wish to purchase ample coverage while they can still afford to do so. As policyholders age, however, their rates rise dramatically.

Using an Insurance Calculator

You'll find life insurance calculators on most insurers' websites, as well as on third-party finance sites, like Bankrate.com. As opposed to quote generators, which request basic numerical information about your age, marital status, health and income, this interactive tool resembles a long-form questionnaire. You'll be asked to estimate your funeral costs, the future needs of your dependents, and whether you have school-age children who may go to college. When analyzing your responses, insurance calculators assume that the return on your policy's proceeds will grow as time goes on.
Remember that it is in the financial interest of any life insurance provider to encourage potential customers to purchase generous amounts of coverage. Life insurance calculators can provide clarity about the process of determining how much insurance you'll need, but don't be afraid to seek a second opinion.

An Alternate Approach

If you wish to bypass traditional insurance calculators, you can roughly estimate the amount of insurance that you'll need by lumping your  future expenses  into four broad categories. These are your funeral costs, outstanding debts, your children's education expenses and your family's day-to-day living costs.
Although your exact figures may vary, finding values for each of these categories is a straightforward process. Depending upon where you live, the average cost of a funeral these days runs between $10,000 and $20,000. Your debt load includes current debts like your home and auto loans, credit cards balances, and any student loans remaining from your younger days. Your childrens' future college expenses may be harder to estimate, but you can make separate calculations for in-state and out-of-state public universities as well as more expensive private schools.
Finally, divide your yearly income by two to determine what your family will need to get by without you. If you worry about your spouse's ability to find work and support your children at the same time, increase this figure accordingly.

You May Be Less Covered Than You Think

Most Americans without a generous stash of retirement savings feel as if they lack adequate coverage. According to LIMRA, a leading advocacy group for the life insurance industry, the average American household owns enough life insurance to replace their income for 3.5 years. While this sounds like an adequate amount, LIMRA found that typical policyholders would prefer to increase their coverage to at least 6.8 times their annual income.