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Thursday, May 23, 2024

10 Tips on How to Choose a Life Insurance Policy

Life insurance today has become an important element when planning financial stability in the family. There used to be a myth that life insurance is for the elderly and that only those who have extended family and children should take life insurance.

But that is not true. People have realized that life insurance is important as the future can be uncertain and anything can present in the future.

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That’s why, sales of life insurance jumped after the 2020 pandemic. However, the insurance market is huge and there are many options to choose from. So which one to choose? How to choose the best life insurance?

These are some of the questions that people are seeking the answer to. Below we have provided some valuable and simple tips to follow when choosing the best life insurance policy. Check it out!

  1. Take the life insurance that covers any type of death

Sometimes the rush to take out insurance is so great that people end up getting confused among the options. Even more so, accident insurance is cheaper and looks attractive, but it is necessary to know how to differentiate life insurance from accident insurance.

When you have accident insurance, the policy will only be paid to beneficiaries if death or disability results from an accident covered by the plan. Therefore, natural death is not covered. In the case of life insurance, any type of death, accidental or not, is covered. Not to mention that there are more complete life insurance policies, which even offer sickness benefits.

  1. Understand how life insurance works

When you purchase any life insurance policy, it means you have concluded a formal and legal contract between you and the insurance company. This contract will include the coverage plan defining the events which the insurance company will have to support.

The contract also includes the beneficiary name who will receive the compensation if anything happens to you or in the occurrence of insurance coverage. In return, you will pay a monthly premium fee or lump amount at once to the insurance company.

If something that is included in your insurance coverage happens, you or your family will receive a policy. Generally, you need to understand different types of coverage which we will shortly discuss below.

Similarly, insurers impose a limit of up to 60 years of age to take out a plan. Some of them also work with a minimum age of generally 18 years old.

Likewise, if you are married, you don’t need to take out two life insurance policies. You can extend the coverage of your insurance plan that can cover the death and accident of one spouse. This will give you better cost benefits than taking out two different insurance policies.

  1. Find out how life insurance is calculated

When purchasing life insurance, it is important to understand how its value is calculated. To do this, insurers evaluate the contractor’s profile according to the data provided in the risk questionnaire. Therefore, we highlight what the requirements are and how they are analyzed.

  • Sex

Insurance companies rely on statistics to evaluate this aspect. For example, as research indicates that women live longer, there are some insurers that offer life insurance that better serves women with exclusive coverage.

  • Age range

The older the age, the greater the risk of illness and, consequently, the more expensive insurance becomes.

  • Profession

There are professions that offer more risks than others. Therefore, the insurance company can charge more or less for insurance depending on it. Remember to notify your insurance company if you change jobs.

  • Health condition

This question must be taken seriously and answered very sincerely. It is fundamental to defining the value of life insurance.

  1. Try to take out tailor-made insurance

Not each insurance policy designed by the insurance company can be appropriate for you. Therefore, depending on your current status, you can customize the insurance policy you want to take out. For example, a single person without financial dependents needs health protection and work capacity.

Whereas someone who has financial dependents, in addition to these needs, also needs coverage for premature absence or asset succession. So they can financially cover their dependents in the face of an absence.

Similarly, if the person carries out professional activities that present risk, he or she must pay extra attention. Such as police officers and drivers are generally not covered by insurance companies or have a lower policy value.

Likewise, practitioners of extreme sports also have a higher monthly fee. As the risk of accidents is greater, many insurance companies charge more or even refuse to serve this type of client.

On the other hand, there is specific insurance for security professionals or other types of higher-risk activities. Therefore, you need to check out all your options and take your time. It is important to clarify all your doubts with the broker before concluding the contract.

  1. Choose the best coverage

From the above discussion, you already have some idea that there are different types of life insurance plans. From those that only cover accidental death and are therefore cheaper, to those that have insurance to help complete school education.

Therefore, the next step is to think about what you need to include in your life insurance so that it is complete and provides what you and your beneficiaries need. The possible coverage combinations include:

  • Funeral assistance
  • Compensation in case of disability
  • Assistance with dental, medical, and hospital expenses
  • Insurance in case of serious illnesses
  • Deaths
  • Acquisition of Deposit and National Transfer
  • Daily rate per Surgical Event

The main thing when buying a life insurance policy is to provide the coverage that you really need. If more is provided than you require, you will pay higher premiums. On the other hand, it is risky not to provide for everything and thus receive too little coverage. This may result in under-insurance.

  1. Mix different types of coverage according to your age

You may not know but choosing the coverage for your insurance plan also depends on your age. If you are young and just starting your professional and financial life, coverage to protect your health and work capacity is the most recommended.

Whereas, for someone who has a family, and children, in addition to work capacity and health coverage, lines of protection be included. This way, the policy will guarantee the education of their children, payment of debts, and financing.

Now, if you are at a prime age, the ideal is to look for tools to ensure that the patrimonial succession is guaranteed and the assets are protected when it comes time to move on.

  1. Check the insured capital

The insured capital is the largest amount that the insurance company will pay to the insurance beneficiaries in the event of an incident covered by the policy, functioning as a type of indemnity. You as insurance policy buyer will choose this value.

Therefore, choose this value carefully, as the greater the insured capital, the higher the value of the insurance installments. Keep in mind whether this amount will cover the necessary hospital expenses, for example. And remember you should define this value depending on your reality, it should not be hypothetical.

  1. Choose the right duration of the life insurance

When you choose to purchase life insurance, you have to decide the duration of the insurance you want to take. The time may vary from a year to maybe even 30 years. But how you’re going to decide?

For such a case, try to think about the beneficiary you want to protect. Think for how long he or she going to need financial support. For example, if your beneficiary is your children, you may have to think about how many years they might be away from financial independence.

Likewise, the duration of a life insurance policy also varies considerably in its cost. If you take out a policy with a ten-year duration today it will cost less than a policy with a twenty-year duration. This is because when you take out a life insurance policy you freeze the premium for the entire duration based on your current age and your state of health at the moment.

Anything that happens during the course of the policy does not interest you because the premium has now been blocked until it expires. However, if you have been insured for 10 years and reach the expiry date, and want to renew it, you will renew at the rate, age, and state of health at that moment. So if you are young, lengthen the duration.

  1. Try to pay in a single installment

You may not realize it, but you will have to pay more for your life insurance if your policy calls for monthly premium payments. Many insurance companies charge extra surcharges if you pay premiums monthly rather than annually. Therefore, if you can it is wise to pay the lump amount at once in a single installment.

  1. Analyze your finances if paying a monthly premium

If you cannot pay annually and opt to pay a monthly premium, analyze whether the monthly fee will compromise your finances or not. Calculate all your monthly expenses such as food, school education fees, household expenses, and so on. Then check how much you can pay per month to purchase life insurance.

Remember that insurance is designed to guarantee the payment of these bills if something happens to you. Pricing varies according to each insurer, the type of insurance, and even the age of the contractor. However, you don’t have to worry, due to the competitiveness in the insurance market, many insurance companies have reduced their monthly fees to a minimal charge.

  1. Buying more can sometimes buy cheaper

The cost of life insurance generally becomes cheaper as a percentage (the ratio of premium to sum insured) as coverage increases. If a client is insured for high sums and, accordingly, pays a high insurance premium, the insurer can provide him with a special discount.

The discount depends on the size of his premium (the higher the premium, the greater the discount). When applying such a discount, the size of the insurance tariff (the ratio of the insurance premium and the sum insured) for the client is reduced.

That means his insurance costs as a percentage of the sum insured are reduced, and it can be said that increasing coverage in some cases will cost the client less.

Of course, to choose the optimal life insurance conditions, you need to familiarize yourself with the offers of different companies. But first of all, you should determine a list of insurance companies that you would entrust to insure your life or the lives of people close to you.

Having received offers, you should pay attention not only to variations in the insurance premium but also to the insurance conditions, i.e. contents of the insurance policy. Determining the optimal insurance coverage (sum insured + set of risks) is the most important topic when choosing insurance.

As a rule, when calculating the sum insured, it is recommended to proceed from 5-7 annual income of the insured. And the set of insurance risks must correspond to the client’s goals when purchasing insurance. In addition, the premium paid for insurance should not exceed 5-10% of annual income so as not to become a financial burden.

  1. Look for insurance companies

The next tip is to look for two or more reputed and reliable insurance companies and check their plans. the monthly amounts that you must pay, as well as the value of the policy. See which option better fits your budget and your needs.

In addition to the price, take into consideration whether the coverage they offer meets your needs. To do this, carry out simulations to purchase insurance and evaluate the options. Nowadays, it’s easier due to the usage of technology.

Almost all companies have their websites where you can enter your information. In a matter of minutes, you will receive your quote and check which plan is best for you.

Another tip is to remember to read the rules imposed by the insurance company in detail. Furthermore, it is important to make sure it is a trustworthy company. Check feedback from other customers of the company, on the internet, or with acquaintances. And avoid institutions that do not provide the necessary insurance information.

Finally, remember to look for brokers with whom you feel comfortable talking and answering all your questions. After all, he is the one who will help you make this important decision.

  1. Insurance policy cheap for one person may not be cheaper for another

When looking for the best life insurance policy, you might be tempted to ask friends, colleagues, or relatives for advice. The experience of those around us can be useful in choosing an insurance company. However, it is not always certain that the positive or negative experience of others is useful in identifying the best life insurance for yourself.

In fact, the determination of an insurance premium is a calculation that takes into account various parameters. Such parameters could generate a greater or lesser risk profile and consequently lead to higher or lower insurance premiums compared to those of other profiles.

Summary for the evaluation to find the best life insurance

Based on the above discussion, there are certain parameters that you should consider when choosing the life insurance policy that best fits you. Such as:

  • The compensation amount: It is certainly not a negligible parameter, but it must not become the only aspect taken into consideration
  • The duration of the coverage: is important especially if you are comparing policies with a pre-established duration
  • Contractual clauses: such as exclusions from insurance coverage
  • The penalties are foreseen in case of late payment
  • Management costs
  • Any additional coverage included in the price of the policy

Final thought

If purchasing the life insurance policy at the right time is important, then choosing the best life insurance policy is paramount. So do not stop at the first proposal, even if it may appear convenient. Carefully evaluate the entire insurance contract in question, comparing it with the greatest number possible of similar products.

And the most critical part, evaluate your finances and how much you can spend per month to find out which life insurance is best. If you are starting in life and have children at home, more complete insurance may be appropriate, so that your family is covered. Now, if you currently do not have a health plan, it may be interesting to take out life insurance that offers hospital reimbursement, for example.

We hope this guide will certainly help you in choosing the life insurance policy that best suits you. If you like this post, do not forget to comment, like, and share.

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