Choosing life insurance is one of the best decisions you can ever make to guarantee the financial protection of your loved ones, in case you unexpectedly pass away leaving behind overwhelming financial obligations.
However, if you want this to be all-fruitful, you shouldn’t just rush for any kind of life insurance. But rather take time to select the perfect one according to your lifestyle. Of course, making the right life insurance decision wouldn’t do anything like bringing you back to life once you’re gone, but it’s a sure way to ease the pain of your family, by shielding them from the financial insecurity that would otherwise render them vulnerable. So are you psyched up to look for a cover?
Here are a few tips to assist you to make the right choice;
If you’re one of those people who has been thinking that all life insurance covers are the same, then it’s time you know you have been wrong all this time. The fact remains, not all life insurance policies are the same. For example, there are those policies that are short-term and others that are meant to accumulate a cash value.
In this regard, most life insurance services provides offer two major basic policies; the cash value life insurance and the time life insurance. The primary difference between the two lies in the fact that while cash value life insurance starts out with higher payment terms, the time life insurance kick-starts with low payment terms.
If for instance, you settle for a cash value policy, you get to enjoy a few privileges which include acquiring loans against the policy, using the cash value to invest in other policies and use it as part of your retirement increment. Better yet, there are various categories of policies within these two main ones and they include;
The Whole Life Insurance; as the name suggests, this policy permanently covers your entire life. It comes with fixed premiums and you get to build the cash value. So you can also use it as part of your savings account.
The Term Life Insurance; this one is limited to a specific duration, such as 20-40 years upon which it expires. Therefore, you only get a premium guarantee only during this time. You can then choose whether you want to renew it or not. But remember in case you choose to renew, the terms of payment might change to accommodate the present times.
The Universal Life Insurance; this one is the most flexible of them all. It offers permanent life coverage with the flexible premium payment amounts. So you can pay as low or higher as you can manage.
As evident from the explanation, you can always get a life policy depending on your budget and of course needs. A permanent life insurance is ideal if you need coverage as long as you live while enjoying a savings element. And on the other hand, you can settle for a term life insurance if your needs are for a specific time and you’re working on a tight budget.
Now that you already know the various options of life insurance, it’s time to reconsider your reasons for getting one. This will ensure you place your money into good use and won’t have regrets later on. To start with, like every individual is different so is their needs for a life policy as it all depends on your situation and current circumstances. For example, do you have dependents? If the answer is no, then you probably don’t need one; at least not the permanent one.
Additionally, if you’re the main provider for your family, then you need a life insurance as compared to someone who doesn’t. Remember, the mortgage and all other sorts of bills will need to be paid whether you’re alive or not. And you don’t want to pass that burden to your dependents, now do you?
That said, you should also consider the amount of coverage you need. Well, while it’s difficult to be definite about this, there is always a way to estimate and it all depends on a number of factors. For instance, do you have another extra source of income in your family? How many dependents do you have? Do you have any other debt? And what kind of lifestyle are you used to as a family? A policy that’s 5-10 times your annual salary should be a good start no matter your circumstances. But if you feel you can still add something more, then ensure you seek the advice of a financial expert before settling for the perfect figure.
If you have been shopping around for the perfect insurance policy, then you must have noticed that most of them request for a physical exam. Others have even gone a step ahead to incorporate a medical question-answer session so that they get to understand your current medical condition. So if this happens to be the case, then the less medical conditions or healthier you’re perceived to be, the less expensive your policy will be and vice versa. The same case applies to age as younger individuals are perceived to be healthier than older ones.
Size doesn’t always matter, but it sure does play a key role in knowing the credibility of a life insurance policy provider. For instance, if a company has been around for decades and is probably functioning very well, then it’s a clear indication that it has an in-depth understanding of the complex insurance sector. Therefore, their risk management skills and history of meeting long-term financial expectations can be trusted. The same case applies to the ability to grow assets. But then, that doesn’t mean you shun away from small companies. There are so many out there with excellent capabilities as their bigger counterparts.
The bottom line here is that when choosing a life insurance policy, settle for one from an already established and credible company. This way, you can rest assured that your money is in the right hands and not with some random company that can run out of business at any given time. Many individuals have been dubbed this way, so don’t fall into the same trap.
As mentioned earlier, a life insurance that might work for you in your late 50s might not necessarily be helpful in your early 30s. Therefore, you will need to regularly review your policy terms to suit your current life stage. There are various factors that can force you to re-access your payment terms and those ones include; the birth of a child/ adoption of one, death of a beneficiary, divorce/remarriage, career changes, moving homes,e.t.c. Remember, it’s always important to keep your policy details updated for easy transition of funds to your beneficiaries in case of sudden death. So much confusion and use of outdated information can lead to wrangles and more pain to the ones you love when you pass away. You definitely don’t want the people your money to land in the hands of the wrong people.
Yes, insurance policies tend to be general in the application of their terms and conditions, but that isn’t what we are talking about here. Look out for life policies that incorporate some amazing features that suit your needs. Listing down such features is a sure way of quickly going through and qualifying policies online or with the help of your policy advisor. Some of the features that you should consider include;
Guarantee on Future Instability; this one is essential, especially for individuals applying for life policies in their youthful years. Getting one with a guarantee on future instability is an excellent way to be assured of changing your contribution terms without undergoing fresh medical exams. For instance, you can decide to increase or reduce your monthly contributions as you near your retirement period.
The Premium Freeze element: a policy with this feature will allow you to pause for a while your premium payments when hit by a financial crisis. This will give you some space to re-strategize and rise up your feet before continuing from where you stopped. No drama or intimidation of losing all your premiums. This is an ideal feature to source out for especially if your type of employment is unstable/unpredictable.
The Benefit Of Financial Planning; Once again, this amazing feature comes through for your dependents when you’re gone. Assuming that neither of them has a clue about financial planning, the policy provider will help them through the financial planning process to ensure that what you left for them is put into good use. This is a fantastic way of assuring their future as most beneficiaries tend to get lost in the mix of possessing so much money at once, hence end up misusing and leading a miserable life later on.
Does paying much more equate to a better insurance policy? Well, not really. In black and white, paying more for a life policy doesn’t necessarily mean you gain access to more features. You might even be surprised to find some features in low-cost policies as opposed to high-cost ones. Therefore, when figuring out the best policy for yourself, you might want to consider hiring a financial policy advisor or sorting out the features as per importance. Remember, in as much as you want to select the most affordable policy in your category, you should ask yourself the following questions for comparison purposes;
Will your premiums change yearly?
How much cash value should you expect with the said policy?
Do you get dividends?
Can you convert your term policy into Whole Life Policy in future without health restrictions?
What percentage of your premiums are not guaranteed?
Use these as a guide when selecting a life insurance policy. But above all, ensure you can comfortably pay the premiums. For a start, you should view your premium as part of your fixed expenses in your budget. There is no room for negotiation because for some providers if you miss one month’s payment, you risk losing it all or incur huge penalties. Once you have made up your mind about life insurance, you cannot get rid of it because of financial issues. So just the same way you will somehow struggle to keep your house insurance and motor insurance, so should your life insurance!
As they are popularly known, insurance consultants can make your work pretty easy; of course, this is if you have some extra cash to spare for their fees. No matter how much informed you feel you are about this issue, it’s important to consult an expert at least once before you commit.
Yes, you can conduct the initial research and decisions, but you need an expert point of view when it comes to issues such as; comparing multiple insurance options, designing your policy to accommodate other covers, get premium discounts and get coverage with potential life policy providers even when you’re a high health risk.
Remember, some external view of things can give you a glimpse of details or options that you hadn’t even thought about. If you can set aside a significant amount of your income for a policy, then it shouldn’t be difficult to set aside some cash for professional consultation.
The process of choosing the perfect insurance product might be tedious, but it can get pretty easy with some basic considerations. Involve a lot of research and expert advice to understand the concepts and terms of life insurance. Remember, you are doing all this for your family’s future. So every single decision you make counts. Make a perfect choice.