It might seem unnecessary, but life insurance can be a financial anchor for your loved ones. Having cover in place can make all the difference when you die, providing your family with peace of mind.
But before you rush into purchasing a policy, there are still a few things that need to be done before and after you buy.
1) Assess your needs
You can figure out your cover needs based on factors such as your income, debts, and financial goals. Consider your family’s future expenses, such as mortgage payments, funeral costs, and various daily living expenses.
Consider the number of dependents you have and their ages. Younger dependents may have longer-term financial needs, while older dependents may require less support.
2) Understand the types of life insurance
There are various types of life insurance policies, including term life insurance and whole life insurance.
Term life insurance provides coverage for a specific time, typically 10-30 years.
It’s often more affordable and can be a good option if you only need cover for the time being. Or, if you want cover for a specific period, such as until your mortgage is paid off.
There are 3 types of term cover:
- Level term : Cover remains the same throughout the policy term. Your premiums also remain the same.
- Decreasing term: Cover decreases over time, usually in line with specific debts, such as a mortgage.
- Increasing term: Cover increases over time to account for inflation. In doing so, the premiums also increase.
Whereas whole life insurance can provide cover for the rest of your life. Because of this, it typically has higher monthly premiums than term cover. This is useful if you want to have future protection in place or to leave a financial legacy for your loved ones.
The policy pays out no matter when you die, so long as you keep paying your monthly premiums. This, in turn, can give your family peace of mind, knowing they’ll have support if anything happens to you.
3) Compare quotes from multiple insurers
Different insurance companies may offer different rates and policy terms, so do your research.
Start by gathering quotes from at least three different insurers. This will give you a good sense of the range of prices and coverage options available to you. Speaking to an insurance advisor or broker can also be helpful in navigating the options and needs.
4) Consider add-ons
You can purchase add-ons to your policy to provide extra coverage. For example, critical illness cover – which pays out if you’re diagnosed with a specified illness or injury.
Another option is having joint cover with your spouse or partner. This can provide cover for both of you and may be more cost-effective than purchasing separate policies.
5) Understand the terms and conditions
It’s crucial to read and understand the Ts & Cs of the policy before purchasing. Pay attention to factors such as the term length, premium payment and any restrictions or limitations.
6) Review your policy regularly
Life changes, and so do your financial needs. Regularly review your life insurance policy to ensure it aligns with your current circumstances. Consider if any adjustments, such as increasing or decreasing cover, are necessary.
7) Choose who will receive the payout
You’ll need to designate someone who will receive the death benefit in the event of your passing. This could be close family such as a spouse or children, or long-term partner.
Ensure you update your recipients as needed to reflect any changes in your life, such as marriage, divorce, or the birth of a child.
8) Keep your policy documentation organised
Maintain all your life insurance policy documents, including the original policy, premium payment receipts, and any correspondence with the insurance company. Having these documents easily accessible will be helpful for future reference.
9) Inform your loved ones
Make sure your family/loved ones are aware of your policy. If you don’t, they may be unaware of it when you eventually die, leaving the policy unclaimed. This can mean paying premiums for cover that will go unused when needed.
Ensure your family has all the details they will need so they can make a speedy claim. This includes info about the insurer, policy number, and any necessary contact info.
10) Regularly reassess your cover
As your financial situation and goals change, it’s important to reassess your coverage from time to time. Consider reviewing your policy every few years. Or whenever a significant life event occurs, such as a marriage, birth, or job change.
Now that you know what you need to do, head online to start comparing quotes from different insurers. Taking these steps will go a long way in helping to protect your family for the future ahead.
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