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Experts urge continued vigilance for life insurance buyers

Life Insurance and Annuities
by Gary Rose
Individual life sales flattened in Q2
Individual life sales flattened in Q2

One of the big issues in the life insurance industry as a whole over the last several years has been that consumers generally don't have the firmest understanding of how such coverage works, what it should cost, and the like. Often, these issues lead to people not thinking they need to buy life insurance. That lack of knowledge about this type of coverage can manifest itself in another way, however. Even those who do buy life coverage may end up sticking with plans that don't work for them as time goes on.

When people buy life insurance, there may often be something of a "set it and forget it" attitude toward the policies, according to a report from the Christian Science Monitor. The fact of the matter is, however, that people's needs change over time, as their family or financial situations tend to change over time. Those who buy such coverage when they have their first child, for example, might not be in the same situation five years on, or when they have another child, or if they get divorced. And these are all important considerations that must be accounted for.

Most people have an idea of how life insurance can help them, but not how to manage it.Most people have an idea of how life insurance can help them, but not how to manage it.

What can be done?
The obvious answer, then, is for consumers to make sure they are carefully evaluating their life insurance needs on an ongoing basis, checking in every few years to see whether the policies they have are adequate to meet all their needs, the report said. This may be particularly true of people who buy relatively bare-bones coverage with a hope of one day being able to afford more in the future. Along similar lines, it's important to map out these issues for the long-term on a continual basis as well, when things such as the cost of living will probably continue to rise. Often, though, changes can be made without re-submitting an application for coverage.

Further, that kind of thing is important when new family circumstances arise because it necessarily requires policyholders to officially update the beneficiaries of those plans, the report said. Meanwhile, though, naming children as beneficiaries might not be a good idea, because life insurers simply cannot give them death benefits unless they have a legal guardian officially named.

Future flexibility
In addition to all that, consistently reviewing life insurance needs also allows policyholders to make sure they're doing all in their power to have the right kind of coverage, the report said. For instance, it might be possible to convert term coverage into permanent coverage with little actual hassle, and that doesn't have to happen for every dollar of the policy's benefits. In addition, it's also possible to cash out or sell life benefits if need be.

Because consumers generally do not have a good grasp of all their options with life insurance, or what the benefits of having such coverage may be, it's incumbent upon policy issuers to do more outreach and education, as a means of creating a savvier customer base going forward.



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