Tip #1: Avoid Designating a Minor Child as a Life Insurance Beneficiary

Many people purchase life insurance with the intent of providing for their children in the event of their absence. However, it's crucial to know that minors cannot directly receive life insurance payouts. If you name a child as a beneficiary, the insurance company will hold onto the money until the child turns 18. At that point, the child gains unrestricted access to the funds, without any guidance or oversight. You wouldn't want your child to squander the insurance money on frivolous expenses like drugs or a sports car, especially without proper financial management.

To circumvent this issue, parents can establish a life insurance trust for their children. This trust not only ensures that the funds are preserved, regardless of the child's age, but also outlines acceptable uses for the money. Additionally, the trust can be structured to distribute specific amounts at predetermined ages, such as 25, 30, and 35. Although setting up a trust for life insurance proceeds may involve some legal fees, it's a wise investment for both young adults and minor children.

Tip #2: Don’t Rely Solely on Life Insurance Quotes

Beware of being swayed by low-priced quotes obtained online—they often only apply to individuals in exceptional health. Statistics reveal that only around 10% of individuals actually secure the lowest-priced policies.

The premium you end up paying may bear little resemblance to the initial online quote provided by an agent. Some individuals fall prey to agents who quote one company at a lower price than another agent.

However, it's important to understand that life insurance policies are priced uniformly, regardless of the source. A lower quote from one insurance broker or website doesn't necessarily mean a better deal. Insurance companies determine policy prices based on factors such as age and health.

Most life insurance companies offer 10-20 different health/price ratings, and neither agents nor websites can guarantee the accuracy of the quote provided. You'll need to apply, undergo a health assessment—which may involve a nurse visiting your home for a mini-exam—and undergo underwriting, which includes a review of your medical records and health history to determine the actual policy price.

Your health rating takes into account factors like family medical history, occupation, and driving record. Use quotes to narrow down your options to reputable companies, and consider opting for a no-load or low-load policy to save on commissions. By aligning your specific health profile with the company best suited to your needs—for example, one that specializes in insuring smokers, cancer survivors, or individuals with high blood pressure—you can ensure that you're getting the most competitive price for your policy.

Tip #3: Partnering with an Independent Agent

While many consumers find success in purchasing life insurance online independently, this approach may not be ideal for those who don't have perfect health. Insurance companies often apply varied pricing based on medical conditions and other risk factors. In the realm of life insurance, the better your health rating, the higher your premium is likely to be. It's advisable to seek out a carrier that is understanding of your specific health circumstances.

Independent agents specialize in navigating the insurance market on your behalf. They can identify insurers who are more accommodating to individuals with high-risk occupations, travel plans, or other factors that could impact your rates.

Tip #4: Ensure Your Life Insurance Policy Includes 'Living Benefits'

"Living benefits" have become a common feature of life insurance policies, allowing policyholders to access their death benefit funds while still alive under certain circumstances. Being able to utilize your policy in this way can be crucial if you fall ill and need funds for living expenses or medical care. Therefore, it's important to confirm that your policy includes this feature.

Living benefits typically come in the form of riders or policy extras, including:

• Accelerated Death Benefits Rider: This rider permits you to access a portion of your death benefit if you are diagnosed as terminally ill. However, eligibility criteria may vary, often requiring a life expectancy of 12 months or less. This rider may be included with your policy or available for an additional fee.

• Chronic Illness Rider: Unlike the Accelerated Death Benefits Rider, this type of rider allows you to access your life insurance benefit without a terminal illness diagnosis. Instead, eligibility is typically based on the inability to perform two or more "activities of daily living," such as eating, bathing, and dressing.

Tip #5: Secure Immediate Coverage with a Check to Your Application

You don't have to wait for your life insurance policy to be issued to secure coverage. The underwriting process can take several weeks, especially if your insurer needs to wait for medical records from your doctor's office or if additional information is requested by the underwriter.

In the meantime, you can obtain immediate "temporary" coverage by submitting payment for your first month's premium along with your life insurance application. Look for the "Temporary Life Insurance Receipt" included with your application, which provides details about the terms and conditions for temporary coverage. This ensures that you're covered while waiting for your policy to be finalized.