Nobody wants to leave a family in financial harm if a tragedy occurs. For life insurance sellers most common product to be sold by life insurance agents or sellers is whole life insurance. The whole life insurance is a bundled product which combines whole life insurance element with a savings plan. It is very expensive to buy insurance and this whole life insurance has some flaws. Some of the flaws of whole life insurance are:
Expensive In Cost:
Whole Life Insurance has one of the biggest flaw which is cost. As whole life insurance is expensive people opt for good quality term insurance. But the company selling whole life insurance doesn’t want the consumer to see out flaws so they market unattractive term insurance rates.
No Savings:
Whole Life Insurance Policies have the argument that savings portion of the policy offset the prices. But actually that’s not true first of all the rate of return on a policy is a low, many policies have a negative rate of return for many years.
To save the savings the policyholders have either to buy their own money from the policy or to cash out the policy and lose the life insurance. With this type of insurance even if the policy holder pays for savings & insurance only one of the two partners is paid, not both.
Avoid Participating Policies:
The participating policies imply that policy owner gets the dividend back. But this is not, true dividend that would represent share in profits, actually it is a rebate of overpayment on the policy.
Universal Life:
Universal Life is one of the schemes which have more traps than whole life insurance. This policy is sold more as investment but actually it tends to bankrupt a person leading to low rates of return. This is a very confusing policy as few consumers understand what they are buying so one should buying it out.
Term Insurance & Invest the Difference:
The best effective method to investing in insurance is simple term insurance. It should be level premiums for twenty years at a time and affordable throughout the life of the policy. Also there is a lot of cost-effective difference between investing in term and whole insurance making term insurance at an advantage
Eliminating the Need for Insurance:
If at some point good financial planning is followed then policyholder wouldn’t need insurance. Basically insurance is needed to replace lost income in case of death of policyholder. In life at a stage where all outstanding payments of mortgages & loans are paid off, children have settled away and a sufficient amount of savings one doesn’t need any insurance.
Combating Consumer Confusion:
The insurance industry is thriving on consumer confusion & ignorance. It is very easy for an insurance agent to sell a bad product when the consumer is in dark. So it is important for potential buyer to do their homework before buying an insurance policy.
So providing on such basic tips on what to buy one would be sure that doing proper homework is very essential as what to do in your requirements whether to go for term or life insurance.
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