In our daily lives, we regularly evaluate our incomes and expenses. But we forget to evaluate our insurance policies periodically. Failing to evaluate our life insurance policies regularly often minimizes the level of our financial security and protection.
However, there are no standard rules regarding evaluating insurance policies. However, without an evaluation process, it is very likely that the benefits we receive will not meet our needs.
Apart from how to evaluate the life insurance policy, you should also know when to evaluate it. Therefore, to keep safe our valuable readers, we have here provided some useful tips based on which you can evaluate whether your life insurance policy is serving its objective or not.
Without delay, let’s jump into the subject.
Tips To Evaluate Life Insurance Policies
- Evaluate before buying your life insurance policy
You should evaluate your life insurance policy before purchasing it. Two factors that you should evaluate when taking out new insurance are exclusions and duplicate coverage. This means that, when taking out insurance voluntarily, you must check the insurance policy includes the coverage you need and that none is excluded from the contract you are about to sign.
Also, check if you have duplicate coverage, that is, the same coverage that you already have in other insurance that you have already taken out.
You must then carefully read all the general and particular conditions of the insurance policy presented to you, before signing the contract. Such as type of insurance, insurer, policyholder, premium, exclusions and coverage, policy start date, termination of coverage, and payment methods, among others. This way, you avoid surprises and know precisely everything you are signing up for in the insurance in question you are purchasing.
Apart from these, weigh your life insurance policy you are about to purchase under these criteria:
- Market experience
The longer an insurer has been on the market, the greater the security it can offer. Therefore, look for a company with an established track record in offering life insurance. This means solidity and more security that, in the future, it will be by your side.
- Insurance conditions
The conditions offered in life insurance generally vary from one insurer to another. While banks provide more limited and not always as advantageous options, companies specializing in this service have a complete approach and market experience, an incomparable value when making your choice. Therefore, seek to know in depth the conditions offered to choose the one that will really meet your needs.
- Recommendations from other people
Having other people’s experience as a reference is also vital when you want to hire an insurance company. Although positive experiences are no guarantee that everything will go well for you. It is much better to trust an insurance company with great recommendations, as your chances of being satisfied and protected are greater.
Before taking out life insurance, it is essential to look at your needs and understand what type of coverage is most important to you. Furthermore, it is necessary to define conditions in the policy, such as the amount to be received, the premium amount, and the beneficiaries. And remember: choosing a good insurance company makes all the difference!
- Understand when is the right time to evaluate your already-taken life insurance policy
Our life keeps on changing so does our needs. In the occurrence of any important events that can directly or indirectly impact our finances, it is time that you evaluate your insurance policy. Some moments to evaluate your policy are:
- Salary increment or new income
Private and government employees will usually receive a salary increase every fiscal year. It’s best to evaluate your life insurance policy after 2-3 years of receiving a salary increase. It’s because a salary increase is accompanied by an increase in expenses with greater lifestyle changes. And the higher a person’s cost of living, the higher the life insurance coverage should be.
In addition, with an increment in your salary or income, you can afford to pay higher premiums. That way, you can increase your sum insured and receive the returning amount in greater value.
- Decrease in income
If you need to review your life insurance policy in the event of an increment in your income. Then in the event of a reduction of your income, you should evaluate your insurance policy. Reduction in income occurs when the breadwinner of the family is no longer able to work.
In that case, paying monthly or annual premiums can be burdensome. For example, during the COVID pandemic, many companies reduced employee salaries to cut operational costs and lay off workers. This policy certainly puts pressure on many people’s finances.
Such circumstances may lead you to reduce policy benefits and coverage. But before doing so, review the potential risks that you may face. Because life insurance coverage functions to cover financial risks. If the sum insured is not sufficient to cover the annual expenses of the family left behind, there’s no use in cutting on coverage.
Therefore, recalculate your monthly expenses, and evaluate whether the cheaper premium calculation for protection benefits is still sufficient or not.
- After getting married or having children
The need for financial protection increases as there are new members in the family. In essence, the insured amount you receive must be able to support your heirs if you die or become disabled resulting in losing regular income. Therefore, in addition to new family members, you must revise your insurance policy.
- New financial obligation
Supposedly, if you decide to buy a new home or new car, it’s obvious that your income will be diverted. If that happens, immediately evaluate your life insurance policy. Make sure the money you have can still be used to pay credit and life insurance premiums. If you feel it is quite burdensome, please revise your insurance premium.
- Evaluate every three years
Apart from these moments, you are advised to evaluate your life insurance policy every 3 years. Check again the insurance benefits you will get. Immediately ask the agent for help to revise the life insurance policy if you feel it is not providing enough financial protection for the family.
- Evaluate your life insurance policy as you grow old
As we get older, the greater the risks we experience in terms of general health. Not only that, getting older which we cannot avoid, also brings us closer to the time when we will leave the people we love. When we are still young and productive, there is no harm in having another health check and reviewing insurance policies, as well as adding the required protection benefits.
- Check your debt
Another factor when evaluating your life insurance policy is the current status of your debt. Make sure all the debt you access is protected by life insurance. This is useful so that your family does not get into debt if you die while the debt is still ongoing. If you access debt from bank credit or financial institutions, your credit is likely protected by credit life insurance.
However, if you access debt from relatives, co-workers, investors, or other parties, which is not accompanied by credit life insurance, then you need to buy life insurance independently.
Choose life insurance whose amount can cover the amount of your debt. As time goes by, of course, the principal of your debt will decrease. So, you also need to lower the life insurance sum that you use to protect the debt.
- Conduct a coverage assessment
The coverage offered by a life insurance policy is one of the essential considerations when evaluating it. Here are some items to consider:
- Coverage amount
Make sure the policy adequately covers the financial needs of your beneficiaries in the event of your death. Carefully evaluate the amount of coverage life insurance offers to make sure it covers expenses such as debts, funeral expenses, and the financial security of your loved ones.
- Duration of coverage
The length of coverage determines whether you need a term policy, which provides coverage for a specific period of time, or a whole-life policy, which provides coverage for the entire time. To choose the right length of coverage, consider your financial goals and the needs of your beneficiaries.
- Read the policy carefully and analyze the information
It may seem a hard working job to read all the policy word by word but it is of great importance. So you understand exactly what you are receiving with the payment of your hard-earned money.
If you can’t understand, always consult the expert and understand each clause mentioned in the policy. Upon receiving this information, proceed with an analysis of the information received and prepare a summary of the most important data so that you have it at your fingertips.
- Name of insurance company and contract jurisdiction
- Insurance Company Financial Summary and Current Rating
- Policy number
- Product Type and Description
- Date of issue
- Date of renovation
- Policy duration
- Expiration date
- Accumulated Value (if applicable)
- Name of the Owner and the Insured, who may be different
- Benefit Amount
- Redemption Value (if applicable)
- Payment method
- Names of the main beneficiaries and the percentages assigned
- Names of contingent beneficiaries
- Account status
- Updated illustration
If you are not satisfied with the information received, you can consult any reputed insurance lawyer.
- Evaluate the ease of hiring and canceling
It is also essential to check how easy it is to take out life insurance. Being able to resort to a practical and digital alternative guarantees a better experience. Furthermore, the cancellation of the policy should be uncomplicated. It is important to be able to terminate the policy easily, without fines or minimum contracting periods. This will give you more versatility to meet your needs.
- Know how the life insurance policy is renewed
The insurance company can automatically renew your life insurance policy only once and for the same period as previously contracted. But for the automatic renewal, it should be provided for in the general conditions of the plan.
However, if you as insurer no longer interested in the renewal, you can communicate your intentions to the company. And your automatic renewal clause is deactivated. But you must communicate your disinterest to the company within 60 days before the date scheduled for the policy to end.
After the first automatic renewal, all others will have to be adjusted between the insured and the insurer, necessarily. It is worth remembering that the non-renewal of a policy on its expiration date does not exempt the insurer from paying compensation for losses that occurred during the insurance period.
Additionally, if you have been renewing the insurance policy for several years, it does not make it mandatory to renew your policy every time it expires. Therefore, check whether your policy has the following clause included: “ This insurance is for …. term, with the insurer having the right not to renew the policy on the expiry date, without refunding the premiums paid under the terms of the policy”.
When insurers do not accept insurance renewal, it is common to present a new proposal with different coverage, contractual conditions, and premiums.
- Evaluate when taking an insurance policy online
When evaluating online insurance, you should be aware of false and fraudulent offers. These offers could be used for phishing scams to obtain your bank account details. Therefore, before entering your details into one of these offers, try to confirm the veracity of this online contract by calling the insurance company in question, using its official contact details.
If this insurer does not have available contacts or accurate information, you should also doubt the insurer’s veracity. If there are discrepancies in the information offered, it may be a case of fraud.
Also be suspicious if, after paying the insurance premium, the insurance company does not provide you with a payment receipt. This is another warning sign for fraud. Since, if the alleged insurance company refuses to send you a payment receipt, it is illegal.
Therefore, to check the authenticity of the company, always clarify in advance with the insurance company whether they will send you receipts after payment.
Finally, when finalizing the online insurance contract, make sure that the policy document has the signature of an authorized person from the insurance company. If there is no reliable signature, it is another warning sign and you can make a complaint.
- Steps to take after evaluation of life insurance policy
Only evaluating your life insurance is not enough, you need to take action to change the life insurance to suit your needs. Here are the steps you should take after evaluating your life insurance policy:
- Perform policy customization
If your needs are changed, you will think about changing the insurance premium. In that case, you need to consult your insurance company regarding changes in your needs. Ask them if you can change the insurance premium on the same policy you have already taken and modify the benefits. If you can lower the premiums, you don’t have to bother with closing or canceling the policy.
- Have additional insurance
If you wish to add benefits to your existing policy or want to buy an additional policy, ten consult the same insurance company if you can do so. Consult with them about which policy suits you best in terms of premium, cost, and protection.
- Buy new insurance
If it turns out that no changes can be made to your existing insurance policy, you can always buy a new one that can better meet your current needs. However, ensure to activate the new insurance policy first before closing your existing one. This way you will remain protected till the activation of the new policy.
Evaluation of a life insurance policy is as important as purchasing it. The process of evaluating your policy begins as you make up your mind to buy a new one. Identifying your needs, coverage, income, and market research are some of the steps you need to take before purchasing a new life insurance policy.
If you have an existing life insurance policy, you cannot rest assured that your policy will look out for you. Therefore, familiarize yourself with the law regarding insurance as it keeps changing periodically. Apart from these, follow the tips we have provided so you are safe from any mishaps and fraudulent activities. Be safe, be secure.