insurance

6 myths about buying life insurance

Myth No. 1: I don't need to worry about my health
Myth No. 1: I don't need to worry about my health

You've seen those low-cost, no medical exam, guaranteed-issue life policies advertised. The ads promise that you won't be turned down, regardless of your health.

But if you're looking for a quick net-worth boost at death's door or a last-minute cash windfall for your heirs, don't count on a guaranteed-issue product.

"For the first two years, the death benefits are minimal," Hasenauer says. "That two-year window is the suicide period, the contestability window where the company would contest that the information you provided was not correct."

The benefits may step up after the contestability period, but not by much. "They're not very big policies; you could never go and get a good estate planning-type policy," she says. "They're pretty close to burial-type policies -- just enough to get you in the ground and pay the minister."

The cost of these policies reflects their increased risk to the insurer. "They're crazy expensive," says Steuer. "And statistically, less than 10 percent of people will qualify for the best available rates that are offered by insurance companies."

If you're considering a guaranteed-issue product, Hasenauer recommends shopping around.

"There is a (price and benefit) difference between the three-question and the 10-question policy applications," she says.

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