People often buy life insurance when they get a mortgage or have kids. While these are good reasons to take out a policy, life insurance can be a useful tool well before then. It’s one of the best ways to shield your family from financial burden should they have to weather unanticipated rainy days – including if you were to die unexpectedly.
These days your options are endless, and buying life insurance can be done by clicking a few buttons. While having choice is good, it can make deciding on the right product for you and your family difficult.
To avoid making mistakes, and to get the cover you need, here are the things you’ll want to think about when buying life insurance:
Get to know the language
Take one glance at a policy document, and you’ll quickly see it’s full of terminology and jargon that may have you scratching your head. Getting familiar with the most basic terms will make the process a lot easier to navigate.
Assess your current financial situation to determine cover
Before you can figure out what type of life insurance you need and how much, you should assess your financial circumstances. You might find that you’re not as prepared for the unexpected as you think.
It’s best to do this exercise with an insurance adviser who can help you evaluate your income, expenses and liabilities, how your finances are projected to change over the years, and how your family’s financial position will be affected if you can no longer work or you die.
Then, when it’s time to choose life insurance, you’ll know what cover you need to provide financial protection for your family.
Plan for a specific financial goal
As time passes, you’ll go through various life stages and at each stage, you may require less or more from your insurance. The key to sound financial planning is keeping your goals clear and specific. That way you can easily adjust your life insurance policy if you need to – and have peace of mind knowing your family’s future is covered at any point in time.
Compare, personalise and read the fine print
There are two types of life insurance. ‘Term’ provides cover for a set period or to a specific age. ‘Whole’ or ‘universal’ covers you for life. Not everyone needs the same level of cover and, depending on whether you have pre-existing conditions or a high-risk occupation that requires additional cover, the finer details of your policy may need to adapt or change.
Work with an insurance adviser to compare companies and products and figure out which is the best option for you. Policies will change depending on the company and product, so make sure there aren’t any exclusions to trip you up.
Choose a cover you can afford
Your life insurance premium is important because the payments need to fit into your budget. You also want to pay only for cover you need – when it matters, and with no extras.
The two key factors that will determine your rate are your health and your age. The younger you are the healthier you tend to be, posing less risk for insurance companies. That’s why life insurance premiums increase with age. Your premium will also depend on how much cover you have.
Choose a payment option convenient for you – monthly, quarterly, or annually – and select any add-ons wisely as these will drive your premium higher. Remember, you can also update your policy if or when your circumstances change.
Don’t forget to name a beneficiary
There’s no point paying for life insurance if you haven’t appointed someone to receive the proceeds of your policy when you die. Speak to your insurance adviser about who might be the best person to be your beneficiary – then sit down with that person and talk through your plan.
Find a trusted insurance adviser
Mortgage repayments, kids’ education, aging parents – these are financial responsibilities you might have when you’re looking for life insurance. The primary purpose of life insurance is to ensure your family is protected and cared for if you’re not able to provide for them. The best policy will be tailored specifically to meet your needs and goals. An advisor will help you go through your policy with a fine-tooth comb and ensure your premium only includes what is necessary.
When you’re ready to purchase life insurance, let the team at Global Finance expertly guide you through the process. Get in touch today.
**These are general guidelines and are by no means a reflection of bank or lending policies