Thinking of taking out life insurance?
If you decide to get a life insurance policy, it is important to take some time to see that the features that are important to you are covered.
This is an insurance policy that you might end up having for the rest of your life.
Much like shopping around for a property loan, it’s important to know your options.
Below are some important things that will go a long way in helping you choose a life insurance policy.
Stepped VS Level Premiums
The first thing you will need to determine when it comes to choosing life insurance is whether the right option for you is level or stepped premiums.
If you choose stepped premiums, then you will need to pay more in premiums as you get older.
The upside to this type of premium is you are going to pay less when buying the policy.
If you are the type of person who shops around and changes insurance policies looking for the best value, then you should consider going with this option.
Level premiums are not going to change as you get older, but you have to pay high premiums when you get the policy.
If you are looking to buy a life insurance policy and never have to think about it, this might be the best option to go with.
One thing to keep in mind with level premiums is that the premiums are not going to increase as you get older, but they can go up as a result of price adjustment from the insurer and inflation.
Benefit Indexation
Life insurance will last until you are 65 years old.
If you are around 30 years old and you decide to buy life insurance, then it will last you decades.
Cover or benefit indexation means the cover in the policy is going to go up every year, either by a set amount or percentage and is in line with the CPI (Consumer Price Index).
According to the cremation specialists at Perth Cremations, it’s always a good idea to put inflation into consideration when choosing life insurance. “This increase in price counteracts inflation and ensures the insurance will be able to provide enough cover. Whether you are going to make a claim in the first year, or 30 years later.”
It’s important to know if you can afford this expense as prices will inevitably change.
Advance Benefit Payment
In the event of your death, some costs need to be instantly taken care of, for example paying for the funeral.
If you had not planned for this or it is unexpected, it can leave your family with trouble trying to come up with such payments. Things like the mortgage and bills will still need to be paid for.
If the life insurance policy has the advance benefit payment option, then the family can get a lump sum payment immediately.
According to funeral celebrant Fiona King, it can be very costly to organise a funeral for a loved one. “Life insurance policies with advanced payment or funeral insurance can give you peace of mind. Knowing that your funeral will not burden your family in an already stressful time can be a real weight lifted."
Adjustment to Sum-Insured
There is no way you can tell the future or what is going to happen 10 or even 30 years to come.
There is a good chance something is going to change that you had not planned on.
You might get an increase or decrease in income, you might change your cost of living – and these will warrant making adjustments to your life insurance so it can provide enough cover.
The insurance policy can have the option of changing the premium, but you should make sure the insurance policy you choose does in fact have the option of changing your premiums if need be.
Exclusions
You should make sure you know what the policy covers – but it is also important for you to know what the insurance policy doesn’t cover.
There is nothing worse than going through the process of making a claim, then having it rejected because of blanket exclusion.
Meaning, it is important to check your Product Disclosure Statement (PDS) so you know what is going to be covered and what isn’t.
The most common exclusion you will see in every insurance policy is a self-inflicted injury.
There is a good chance your claim won’t be successful if it is related to self-inflicted harm.
Cooling Off Period
Just like any other insurance product, it should have a cooling-off period.
This period comes immediately when you purchase life insurance and will be 14-30 days long.
What this means is you have the option of cancelling the insurance policy if you change your mind, and you are going to get a refund on the premiums already paid.
TPD, Funeral, Trauma, and Children’s Cover
There are some covers you can get on their own, but there are some that are bundled with life insurance.
This includes Trauma, Total and Permanent Disability, Funeral, and Children’s Cover.
● Trauma Cover – This optional cover gives a lump sum payment if you wind up with a sudden illness such as heart attack, stroke, or cancer or you need to have a medical treatment such as coronary artery bypass surgery.
● Total and Permanent Disability Cover – If you get a serious injury that makes it impossible for you to work or live independently, then this cover is going to help you with things like medical costs, upgrading your home for disabled access, or employing a carer.
● Funeral Cover – This cover has been designed to provide cover for the funeral. It can be cheaper for you to buy this cover on its own than full life insurance. Having it bundled with the life insurance policy is the same as the advance benefit payment option.
● Children’s Cover – This is not something many people like to even think about – but there is an option of adding insurance for your children to your policy. This will pay you a lump sum in the event of a child dying or getting injured or ill, so it covers the funeral costs or medical expenses.
You can now have a look at the different life insurance options in the market because you know the key features to look out for.
Want to get started looking for the right life insurance policy for you? Talk to the Steve from Mortgage Compare Plus today.
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Author Bio:
Jack Poole is an Australian writer and business student living in Sydney. He is extensively knowledgeable in financial-related topics. Jack has a passion for the arts. When he’s not studying or writing, you’ll find him frequenting the art museum.
Disclaimer: This article provides general information only and may not reflect the publisher’s opinion. None of the authors, the publisher or their employees are liable for any inaccuracies, errors or omissions in the publication or any change to information in the publication. This publication or any part of it may be reproduced only with the publisher’s prior permission. It was prepared without taking into account your objectives, financial situation or needs. Please consult your financial adviser, broker or accountant before acting on information in this publication.