Life insurance tips

Insurance Purchase Tips

• Decide the amount you need to be covered for: This is the most important step in buying a life insurance cover. Find out what is the amount of cover right for you. If your cover is insufficient to meet your present liabilities, your dependents will have a hard time to make their ends meet in case of your death. If you take very high life cover, you will end up paying very high premiums which are a waste of money.
• Find out the coverage included in your policy: Certain life insurance policies also provide cover for certain instances like unemployment, disability or critical illness. So if you already have separate insurance policies to cover these instances, you can always exclude them as going for them will increase your premium amount. This can be unnecessary expense.
• Decide on the type of insurance policy you want to go for. If you want the cheapest insurance policy without an element of investment, go for term plan. For insurance and investment for a definite period, choose between endowment, whole life and unit link insurance policies. Due to the absence of investment option, term policy is the cheapest and unit link policy is the costliest.
• Decide how long you want the policy to cover you: Your premium will be decided by the term you want your policy should last. This is very important because as you grow older, your premiums will increase. So if you have decided to take a policy for 15 years, your premium will increase at the time of renewal, as you have grown older. If you want to avoid this situation, opt for a whole life policy so that you are covered till you die.
• Get life insurance quotes: Getting life insurance quotes is very important as different insurers have different premiums for a specific amount insured for a certain period with certain exclusions for a certain age. If you choose to avail of the insurance riders than the life insurance quotes will increase and this increase will not be uniform amongst various insurers. Asking for life insurance quotes can save you a lot of money over the policy term.
• Study various life insurance quotes: After getting various life insurance quotes, go though them minutely. Understand what every policy covers as well as its exclusions. Select few policies that fulfill your need.
• Find out about the customer service quality of the short listed insurance companies: Quality of the customer service provided by insurance companies will vary a lot. Just because an insurance company is well known, it does not mean its customer service is excellent. You can get an honest feedback about the service of the insurers on different consumer forums, as well as consumer review websites. Here you’ll get an honest appraisal about the customer service of the insurers from actual experiences. It is very important to observe how quickly the company settles the claims, how the company deals with you in case of loss of policy documents and the ultimate surrender value of the policy, in case you cannot keep on paying the premium.

• Never buy a policy you don’t understand: If you are given illustrations or booklets save that material with your policy. If your agent or company cannot explain the policy terms to your satisfaction, shop elsewhere. Make sure you understand the guarantees in your policy (not just the agent’s promises of returns) and the surrender penalties if you choose to drop the policy at any time. These costs are often hidden in a life insurance or annuity policy.
• Update your coverage as your circumstances change: Don’t be misled by someone who tells you should buy additional policies for children as they are born. Children rarely have an income and seldom require life insurance. But your situation may change dramatically from year to year. Review your net worth every few years and reconsider the prospects your survivors may face if you die.
• Investigate the renewal procedures: As people get older, their health usually declines and this can lead to increased premiums or even a status of “non-insurability” if the policy is being purchased for the first time at an advanced age. Before buying a policy, ask about guaranteed renewability at the expiration of the original term period. It will cost you something, but having guaranteed renewability should be worth a few extra premium dollars in the near term as it will save you big money in the future.
• The sooner, the better: The earlier in life you identify your needs, and purchase life insurance coverage, the better. The answer should be obvious – no matter what your age, it will never cheaper for you to buy life insurance than it is today. Do it early, lock in the rates and you will save a good chunk of change.
• Forgo the fractional: You will have a choice of how you will pay your insurance premium. It could be annually, once every six months or quarter, or once a month. While paying monthly or quarterly amounts may seem like a money-saver or a good budgeting device, most of the insurers add a “processing fee” for premium payments made more frequently than once a year. Ask about these “fractional premiums” to see what you may be charged for making payments monthly or quarterly. If the insurer you choose does charge more for paying frequently, try to design your budget to pay just once, or at most twice, per year.
• Group insurance through your employer: If it is available at your company, an employer-sponsored group plan is one of the best ways to obtain high coverage amounts for a low premium.