The Ultimate Guide to Life Insurance – Part 2
In part 1 of our Guide to Life Insurance, we explored the concept of life insurance and how it works, comparing it to accidental death cover and highlighting the huge life insurance gap identified by ASISA.
Part 2 of our Guide to Life Insurance delves deeper into the subject, explaining what you should look for in a life insurance policy and comparing the different types of life insurance available. We also explain why having a trusted advisor to ensure that you purchase the correct life insurance for your individual needs is one of the most important choices you can make.
WHAT TO LOOK FOR IN A LIFE INSURANCE POLICY
Life insurance policies are designed to safeguard you and your family from financial uncertainty that could be caused by serious illness, disability or death – but not all policies are equal, with different levels of service quality and benefits being offered by different insurers.
Your policy needs to be easy to manage and claim when necessary, and be capable of being flexible. Whichever policy you choose, your broker can help you make sure it meets all the criteria for your unique needs.
- Paying premiums for your whole life means that your circumstances are bound to change over the years, with life events like getting married, having children and taking up new hobbies or pursuits. If your policy is flexible you will easily be able to adjust your cover as and when your situation changes.
- Of course, these changes also mean some admin may be required. Being able to view and update your policy details online makes this admin relatively hassle-free, as does the ability to submit documents and claim online.
- When it comes to claiming, it’s good to know if your insurer has a history for paying out quickly, and how much paperwork is involved. If the process is automated, or your broker is working on your behalf to assist with the claim, you’re likely to save time and money.
FIXED / TERM LIFE INSURANCE VS WHOLE LIFE INSURANCE
Life cover is designed to last for either a specified period of time (term life insurance) or for your entire lifetime (whole life insurance).
Term life insurance can provide cover during important life events, such as your children growing up or for the duration of your home loan. If your death occurs while you are covered by this type of policy, your beneficiaries will receive a lump sum payout.
If you need life insurance for as long as you live, to assist with burial expenses or ongoing financial support for your spouse), you should consider a whole life policy.
Whole life policies have a cash value that’s meant to increase over time and normally include an investment component, meaning that a payout is made either to you when you cancel the policy, or to your beneficiaries in the event of your death.
The premiums you will pay depend on the type of policy you get and how large the death benefit is. For term life insurance policies, the length of the term will also affect the rate you pay. Some policies offer the option to convert to permanent life insurance if you would like to “upgrade” in the future.
Two key factors considered by insurers when determining your premiums are your health and your age. The younger you are when you buy life insurance, the cheaper it tends to be, because younger adults are likely to be healthier and therefore less risky to insure.
FACTORS TO CONSIDER WHEN BUYING LIFE INSURANCE
Before you make any decisions, it’s important to assess your own situation as well as the options that are available to you. Again, working with a trusted and experienced broker who has your best interests in mind, means you’ll get a clear picture and the best outcome.
Your broker can help you understand how long you need coverage for, how much cover you need, who you should name as beneficiaries, and any other financial objectives you might want to achieve.
Our team of experts can answer any questions you might have on your life insurance policy, and advise on the best policy for your needs if you aren’t already covered.