Life insurance provides financial protection for your loved ones in case of your unexpected demise. When purchasing a policy, these are the key questions to consider as you evaluate your options:
How much coverage do I need?
Determine how much your beneficiaries would need if you were no longer around to provide for them. Consider ongoing living expenses, large debts that must be paid off (like a home mortgage), and savings for major future costs like a child’s university education. Opt for a coverage amount that would allow your family to maintain their current standard of living. Many financial advisors recommend 10-15 times your annual income.
What type of policy should I get – term or permanent life insurance?
Term life insurance covers a set timeframe, usually 10 to 30 years. It only pays out if you pass away during the term. It is the most affordable way to obtain a substantial death benefit. In contrast, permanent life insurance provides lifelong protection as long as you pay the premiums. It has an investment component that allows cash value to accumulate. Permanent policies tend to cost more than term policies.
How long should my coverage last?
If you want lifelong protection, permanent life insurance is the way to go. If you have short-term needs, like covering expenses until your children are independent, term life insurance may suffice.
How reliable is the insurer?
Make sure to buy from established insurers with strong financial stability ratings. These ratings gauge an insurer’s ability to pay out claims. Also, research customer service ratings, as you want a responsive and helpful insurer. Comparing several reliable insurers before making a decision can help you find the best fit. ACKO General Insurance is one of the providers offering a variety of insurance solutions worth considering.
How much are the policy premiums?
The premium is the periodic amount you pay to keep the life insurance policy active. Term life insurance offers the lowest premiums, especially if you buy it when you’re young and healthy. Permanent life insurance premiums are higher because they include a savings or investment component. Get premium quotes from multiple insurers for the coverage amount you need.
Are there any exclusions or limitations?
Different policies come with specific terms and conditions. Carefully read the fine print to understand exclusions that would make the death benefit void, such as non-disclosure of medical conditions or death due to illegal activities.
Does the policy accumulate cash value?
Permanent life insurance policies, like whole life insurance, build cash value over time. You can borrow against this cash value or withdraw from it, offering more flexibility compared to term insurance. However, premiums are significantly higher.
Can I adjust the policy in the future?
Your life insurance needs likely change over time – a growing family requires more coverage, while you may need less later. Many policies allow you to adjust the premiums, coverage amount, terms and duration to suit your changing priorities. Understand the flexibility available so you can modify the policy as needed.
What benefits and riders are included?
Riders provide additional benefits, such as a premium waiver in case of disability, a terminal illness payout to use while alive, and a payout for accidental death or critical illness. These riders cost extra but may be worth it, depending on your situation.
How do I designate policy beneficiaries?
Your beneficiaries are those who receive death benefit payouts. You can name multiple primary and secondary beneficiaries. Confirm who should be your beneficiaries and ensure this information is accurately captured in the policy documentation to avoid confusion later.
How do I apply, and what medical tests are needed?
The application process may require medical exams, a health questionnaire, access to medical records, and a family history check. These ensure you are insurable and the insurer can accurately evaluate your risk level. Be prepared to undergo detailed medical tests and evaluations before coverage is approved.
The Bottom Line
Life insurance is an important financial safety net. Before buying a policy, determine your needs, compare types of insurance, and research insurers’ reliability and premium costs. Pick adequate, affordable coverage from a stable provider. Review exclusions and make sure beneficiaries are correctly assigned.
