Questions to ask before selecting a life insurance policy

Taking out a life insurance policy should be a priority, as it ensures that your family members and loved ones are financially supported when you’re no longer around. However, selecting a policy and provider that is best suited to you and your lifestyle, and the expenses you would like taken care of when you pass away, can be a complicated process.

Before you apply for life insurance you can, of course, do your research and refer to online resources, such as The Insurance Bulletin, but there are certain questions that you’ll need answers to in order to know which cover is right for you.

What do I need life insurance for?

Life insurance cover, as a basic, will pay-out a sum of money to your nominated person or people, known as beneficiaries, when you pass away. With just a monthly or annual premium, you can be rest assured that they have the support in the event of your death.

But when considering your life insurance policy, you should also think about the specifics of this pay-out. Beforehand, you should decide who the beneficiaries will be, and whether they will require a lump sum of money, or a steady stream of pay-outs. Taking the time to work out these details will help towards choosing the right cover for you.

How much life insurance do I need?

In order to answer this question, you need to take into account the amount needed to provide security for your beneficiaries, but also how much premium you can afford on a monthly or annual basis. You also don’t want to have life cover for less than what your loved ones will need.

This will take some calculations, and there are several ways you can work this out:

  • You can work out how much you can afford to pay each month, rather than the policy total, and calculate how much coverage that will buy you.
  • You can list the financial obligations that you would like paid, and calculate a total of these expenses that need to be covered.
  • You can calculate the amount of the pay-out, by multiplying your income by the number of years that you would expect your family to need support.
  • The most complicated but thorough calculation is to combine the above, and work out your debt, the income that you would like to replicate, and any mortgage and education expenses.

How long should the cover last for?

The length of life insurance is solely dependent on the individual’s needs, and should take into consideration any children, and if you require them to have financial support into their adulthood.

This will also affect the type of insurance you apply for. For example, Term Life Insurance will cover you for a pre-agreed, set period of time, whereas Whole Life Cover will last for as long as you live.

What details do I need to provide?

In order to apply for a life insurance policy, you will have to provide some details including your occupation, whether you smoke or not, or any risky activities that are part of your lifestyle. However, depending on your provider, this could include a full medical examination from a doctor, or just a series of questions to answer. Either way, it is advised to be completely truthful, as this will affect the rate and level of cover.

Can I change or add extras to the policy?

Life is unpredictable, and so you should look for a life insurance policy that can reflect that. Before committing to a provider, check whether you can adjust your policy easily and without additional fees.

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