What are important life insurance policy details?


Quick Answer

Important details consumers should consider when purchasing a life insurance policy include its term of coverage, cash value, cost and hidden fees, reports About.com. Other considerations include the status of dependents, other sources of income, ongoing debt and lifestyle. A fee-only insurance adviser can help consumers evaluate the various types of policies and find one to suit their needs.

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Full Answer

Whole-life policies cover people for their entire lives, maintain the same premium rates, and accumulate tax-advantaged cash value, points out About.com. However, whole-life policy premiums are much higher than premiums for term-life policies, which cover consumers for a specific number of years. Additionally, because the commissions and extra fees are so high in whole-life policies, the cash value is negated for the first several years, explains CNN Money. Other savings opportunities such as IRA and 401(k) plans have smaller fees, higher returns and better portability, making them better investments than whole-life insurance, so for most consumers term-life insurance is preferable.

Financial planners stress that consumers need life insurance that covers five to 10 years of their annual salaries, explains CNN Money. When calculating the amount of insurance needed, important details include whether children are young or ready to leave home and how soon the spouse would begin to receive retirement benefits. Health is another consideration that impacts life insurance premiums, as those who are of average weight, don't smoke and have safe occupations get better rates.

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