What to look for in a life insurance plan

NEW HAVEN, Conn. (WTNH) – September is Life Insurance Awareness Month and this morning John Caserta, managing partner at Caserta & de Jong, stopped by our studio to break down the common misconceptions consumers have about life insurance and teach us how to shop for a policy and how it can tie into your big-picture family financial plan.

What are some of the common misconceptions consumers have about life insurance?

Life insurance is expensive. Studies have shown that while Americans acknowledge that they need more coverage, cost is a primary factor in preventing the purchase. LIMRA notes that 80% of people surveyed grossly overestimated the cost of insurance often by thousands of dollars.
I have enough coverage through work. Employer plans often provide maximum coverage that equates to several multiples of compensation. These limited amounts can help clear out debts but they most likely are not enough to help replace the future income that is lost by a premature death. If someone in their 30s or 40s passes away, there can be upwards of 40 years of lost income.
I’m too young for life insurance. Millennials often overlook life insurance because they feel that they’re too young for it or they don’t necessarily need it. If they have cosigners on loans, like student loans, those liabilities become the burden of the cosigner in the event of a death. And even if there aren’t any immediate liabilities, at some point in life there will be. And getting coverage when one is young and healthy is easier and less expensive than when one is older and may have had some health issues.

What are some tips for how consumers can shop for a policy?

Work with a licensed insurance agent. The internet can be a great resource for researching and even buying life insurance. But an insurance agent can help explain policy details, evaluate various options from different companies, and also take into account all of your personal finances to determine the appropriate type and level of coverage.
Research the different types of coverage available. While there are endless resources online, LifeHappens.org is a non-profit organization that provides information on life insurance including the different types that are available and calculators to help give you an idea of how much you might need.
Check the Comdex score of a life insurance company. You want to make sure that the company is financially strong and that it will be there to pay the claim. Comdex scores range from 0-100 and are a composite of the available ratings for the company including AM Best, Standard & poor’s, Moody’s, and Fitch. Ideally you want to look at companies that have a range between 85-100.
Check the claims paying history of the life insurance company. As your agent about their experience with the company in terms of service and claims paying. And ask your agent what companies and policies types they use and why.

How does a life insurance policy play a role in big picture family financial planning?

A life insurance policy can not only help replace income and eliminate death, but certain types can also help enhance savings, retirement, and even college savings plans. Permanent life insurance policies provide both a death benefit and a living benefit for the owner in the form of a cash value component. That cash value can be leverage in a tax-advantage manner at any point in life for any reason. In the past, my clients have used it to fund college, enhance retirement, and even refinance their debt.

 

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