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LIFE INSURANCE. Ideas to consider

Unlike every other kind of insurance, the prices for life insurance have plummeted over the past decade. Almost everyone can cut their premiums or lock in a lower rate for a longer time period if they know how to shop around. Even people with health conditions may be able to get better coverage now. Here are some strategies to help you find the right coverage at the lowest cost:

  • People with health problems may also be able to lower their rates now or finally get coverage if they've been rejected in the past. It's a good time to shop around again if you have diabetes, asthma, heart disease, hepatitis C, prostate cancer, or if three or five years have passed since your last cancer treatment. You may get a better rate now, depending on the severity of the disease, if you can show the insurer that you've been controlling the condition. The rates tend to vary a lot from company to company; some specialize in certain conditions while others reject anyone with the disease. Work with an agent or broker who knows which companies tend to offer the best rates for someone like you and strategies for presenting the strongest case to the insurer.
  • Buying extra life insurance through your employer may not be the best deal if you're in good health, but could be a good option if you have any medical problems. Compare the cost to buying a policy on your own, where you could qualify for a preferred rate. Buying mortgage life insurance usually isn't a good deal, either, unless you have health problems. Otherwise, buy a policy on your own so your heirs can decide where the money goes, and aren't forced to spend it all to pay off the mortgage.
  • Most people have way too little life insurance. The standard rule of thumb to buy eight to ten times your income can be a good start, but your actual needs can vary a lot depending on your family's bills. To get a more accurate figure, add up your family's expenses, subtract the amount of income that will continue to come in after you die, then buy enough life insurance to fill in the gap. Several calculators can help you do the math. It can be very inexpensive to boost your coverage by hundreds of thousands of dollars. You don't need any life insurance if nobody depends on you financially.
  • Term insurance is the best type of insurance for most people, who only need the coverage until their children grow up, they pay off their mortgage, or they retire and start receiving a pension with survivor's benefits. Only consider cash value life insurance if you need the coverage for more than 30 years. Otherwise, you can generally find better places to invest your money, and the fees and insurance costs tend to eat up a lot of your potential returns. You can, however, keep these policies for the rest of your life, no matter how long that is, which can be helpful if you need the money to pay an estate-tax bill, support a special-needs child who will never be on his or her own, or provide money for your spouse to live on if your pension stops entirely when you die.
  • If you are buying a cash value policy, look at no-load companies or ask your agent to lower his commission. Look carefully at the illustration when comparing policies to see how much money pays for insurance costs and fees and how much actually makes it into the cash value. Ask for a new illustration every few years to see what's been happening to your investment and your costs, and consider making a tax-free exchange to a lower-cost policy after the surrender period has passed.

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