Purchasing life insurance is an essential financial decision that can provide peace of mind for you and your loved ones. The right life cover can help protect your family financially if something unexpected happens to you. When exploring life insurance, you must consider a few key factors to maximise the benefit. In this blog, you’ll explore how to choose the right type of life insurance, calculate the amount of coverage you need, compare policy options, and get the best rates.
Determine the Right Type of Life Insurance
The first step is deciding whether term or whole/permanent life insurance suits your requirements.
- Term life insurance provides pure life protection for a set period, such as 10, 15, 20 or 30 years. It pays out the benefit if you pass away during the term. There are no savings or investment elements with term insurance. Term life insurance tends to be the more affordable option for most people who want to maximise their beneficiaries’ death benefits.
- Whole/permanent life insurance provides lifelong coverage, builds cash value, and has investment components. However, the premiums are typically higher than term plans.
Calculate the Right Amount of Coverage
Once you decide on term life insurance, determine the right coverage you need. Some guidelines include:
- 10-15 times your annual income: This replaces income if you pass away as the primary breadwinner.
- Mortgage balance + education costs: This provides enough to cover housing expenses and college for dependents.
- All outstanding debts + funeral costs: Add up credit card balances, loans, medical bills, etc. and ensure they can all be paid off.
Take your financial obligations and future needs and use that sum as a starting point. The final death benefit amount may be higher or lower, depending on your situation. Use an online calculator to estimate the right sum assured, policy tenure and premium associated with it.
Compare Policy Options
Once you decide on the coverage amount, explore policy options among insurers for the best rates. Get quotes from five to ten reputable national companies. Compare the premium costs for similar policy terms and death benefits.
Some insurers may offer better prices if you buy directly online versus through an agent. Take advantage of any discounts you may get by purchasing life insurance through your existing insurer. Also, consider policy riders that provide additional benefits, such as accelerated death benefits, premium waivers, accidental death coverage, etc. These riders usually come at an extra cost but can provide a financial buffer during illnesses or disabilities.
Review insurers’ financial strength ratings and opt for companies with high CSR. This helps ensure the insurer can pay out claims in the future.
Get the Best Rates with Good Health
One factor that can significantly reduce your life insurance premiums is your health condition. Insurers offer the lowest rates for those in excellent health. Some tips to score the best health ratings:
- Get a physical exam and have your doctor submit records showing ideal blood pressure, cholesterol, etc.
- Maintain a healthy weight and lifestyle with regular exercise and a balanced diet.
- Avoid risky hobbies like skydiving, scuba diving, etc., for which insurers may impose higher premiums.
- If you have any pre-existing medical conditions, ensure they are well controlled through medication, treatment, etc., so insurers can see your condition is stable.
- Be honest when filling out the application, and disclose any major illnesses. Incorrect or omitted information can allow insurers to deny claims later.
Review Coverage Over Time
Finally, review your life insurance needs every few years and adjust coverage accordingly. Events like new children, mortgages, better health, etc., may change the amount you need. You want sufficient protection but don’t overpay either.
Conclusion
Choosing the right life insurance is an important decision. The tips above can help you secure a life policy that provides your loved ones maximum financial protection. Consult an experienced agent or financial advisor to tailor coverage specific to your situation.
