There is no denying that purchasing life insurance could be one of the most important decisions you will do. However, it could prompt a couple of questions.
From deciding how much coverage you need to who you will name as the beneficiary, you have a lot to think about when it comes to buying a policy.
It is only natural that you have a lot of questions brewing in your mind, and you are looking for clear answers. To help you come up with a decision, here are some important questions to ask:
How much will the premium cost?
Life insurance coverage relates to how much insurance money your family will need in case something unprecedented happens to you.
The people at ServicePros Compare Life Insurance NZ also point out that insurance coverage has something to do with how much you are willing to purchase and how much you can afford.
Plus, the amount of life insurance coverage you are willing to have will also depend on your number of dependents, your assets, and liabilities.
What type of life insurance should I get
There are two main types of insurance policies: Term life insurance and Whole Life (Permanent) insurance.
Term life insurance is more affordable than the latter, and you can choose the level of premium for 10, 20, or 30 years.
If you have younger children and your primary concern has the funds to pay for their college education, depending on how old they are now, you can consider a ten or 20-year term insurance policy.
If you pass away while the insurance is still valid, then your beneficiaries will receive a death benefit payout, which they can use for educational purposes, for instance.
Meanwhile, Permanent life insurance plans will provide lifetime coverage, as long as all your premiums are paid.
Moreover, if you buy your child a permanent life insurance policy, you and your child will be covered for the rest of your lives, even if they develop health problems. Provided that you keep paying the premium so that your life insurance policy is in force.
How long will I be insured?
As mentioned, there are two policy types: Permanent and term life insurance.
Permanent insurance is good for the rest of your life, while Term policies last only depending on the term that you purchased (usually around 10, 20, or 30 years).
Meanwhile, Term insurance is relatively cheaper. Therefore it has lower premium rates compared to Permanent insurance policies.
What are the benefits of being insured?
Apart from the death benefit that your loved ones will receive in case you pass away, insurance providers offer additional benefits called “riders.”
Let’s say; you’re searching for ways to supplement your income. Your life insurance can serve as your emergency fund in case of job loss. There are also insurance companies that can reimburse a certain amount of your hospital bill.
So, think about what you want. Do you need assistance in case you got hospitalized or while looking for a new job? Are you looking for ways to diversify and grow your money?
Having a life insurance policy can help you achieve that. So make sure that you communicate your needs to a financial advisor or life insurance agent.
What Happens if I Miss a Payment?
According to the Insurance Information Institute, your coverage may lapse if you miss a premium payment of your policy.
However, you still have several options in case you can’t pay your premium in a permanent insurance policy. You can utilize the policy’s cash value towards the premium. That way, you would still be covered.
Some policies will also allow you to temporarily pause or even reduce your payments. But for you to avail of these options, your policy must have accumulated enough cash value to cover your premium amount.
If you can’t avail of these options or unable to pay your premium, your payments may lapse.
What if I Outlived My Policy Term?
Some people who purchased term life insurance get upset when they found out that they are less likely to reap its benefits in case they outlived their policies.
If this is your concern, then you must have a thorough understanding of what will happen to your policy as soon as it nears its term.
In relation to this, if you are still healthy near the end of your term and you still want to keep the coverage, the best solution is to apply for a new policy. On the other hand, if your beneficiaries and dependents are insured on their own, you can let the coverage expire.
Who Should be My Beneficiary?
When you purchase life insurance, you need to choose a beneficiary. Someone you can entrust with the benefits in case something unprecedented happens to you.
Your beneficiary could be anyone from your immediate family. This includes your spouse and children if you have a family, or your parents and siblings if you are single. Your beneficiary could also be an entity such as a charitable institution.
Picking a beneficiary can be an emotional decision on your part, but it’s an important step that you need to take to make sure that your insurance’s benefits are dispersed according to your wishes.
How can I Save Money on Life Insurance?
Most life insurance premium rates in the market are affordable now more than ever. But still, there are several things that you need to keep in mind to keep the costs low.
For instance, purchase policies that have a face value amount that reflects “quantity discounts.” You can also save by buying insurance premiums annually instead of paying it on a monthly or quarterly basis.
There are a lot of factors that you should consider when buying a life insurance policy. Not to mention that you are required to pick a beneficiary.
Therefore, asking the right questions upfront can bring you to the right decision.
It is also important that you ask a financial professional the right questions so that the whole process will be a lot easier to navigate.