7 Questions to ask before taking out life insurance
Making the financial decision of purchasing life insurance can seem daunting. However, asking the right questions can help demystify the process and lead you to a policy that is suitable for your needs. We always recommend speaking to one of our Financial Advisors to help you with the process, but here are seven questions to get you started:
1. What benefits will the cover offer your loved ones?
There are many options that are available on the market. However, paying for something that doesn’t have features that are beneficial to you will not only hurt financially, but it can also affect your beneficiaries. Knowing what you are covered for and the exclusions that come with a policy can quickly point out whether a policy will be suitable for you or not. It is also useful to compare your options before settling on one.
2. Am I taking out adequate cover?
Having cover is one thing but knowing that you have enough cover is vital. When taking out a policy you will undergo an underwriting process which will give you a premium based on how much life cover you want. However, depending on how flexible your budget is, you also have the option of increasing the cover amount to adequately cover your loved ones in future. Keep in mind that your needs are different from the next person. Checking your expenses can help you gauge how much you will need.
3. What is the claim process?
A huge amount of life insurance policies go to waste each year when those left behind are unaware that their loved one had life insurance in place. Because of this, it is important to inform your beneficiaries about your life insurance after you’ve taken out a policy, so that when you have passed on they are able to claim.
Knowing how the claims process works can also make the process smoother for your loved ones to access the money they need to carry out the funeral or pay for other expenses. Setting a folder aside with the necessary documents that are needed for a claim can also help you avoid going back and forth.
4. Will your premiums remain fixed or increase per annum?
Being able to afford your life insurance policy is essential. This can ensure that your payments are always met. It is also a great way to factor life insurance into your budget – generally, the premium increases year on year are marginal and the cost benefits of taking out a policy while you’re still young will outweigh the cons of any increases. However, make sure to check the fine print so that you know what to expect.
5. Can you add extended family members?
Insurers are different and so are the life insurance policies that are offered. There are some policies that come with a built-in feature of adding additional family members under one premium instead of taking out multiple policies. Asking such questions can also let you know the terms and conditions that come with such features.
6.When does the cover start?
Some life insurance policies will cover you as soon as you have accepted the cover and dropped the call, even if you haven’t yet paid a premium. However, other companies will require that a period passes before the policy is applicable and should something happen to you in the gap, you wouldn’t be covered This is usually because there is a delay in the process of when you take out the policy and when it commences.
7. Are there any waiting periods or exclusions?
Most life insurance covers stipulate waiting periods that you may need to consider. Typically, these will focus on suicide but some policies may have other conditions stipulated. All this means is that you need to check your policy; it may state for example, that should you commit suicide during the first year of taking the policy that you will not be covered. All of these details will be listed on your policy.
Exclusions also vary from insurer to insurer but mean that there are certain instances in which your life insurance won’t pay out. These are also included in your policy documentation. For example, your cover may not pay out if you’re killed while participating in illegal activities or while taking part in a dangerous activity like skydiving.