I saw this interesting Life Insurance cheat sheet on Bankrate which I thought was worth sharing. There are 3 basic questions that people often ask themselves prior to buying, which are primarily just when, how much and what to buy.
Some keynotes for Life Insurance (which is incidentally applicable to other insurance as well):
Transfer of financial risk. Losses or the consequences of certain events could be costly. When you don’t wish to take this financial risk on your lives, you can pay a premium to an insurance company. The insurer accepts that risk on your behalf and covers the eventuate financial costs.
Peace of mind. Some people can’t sleep when the financial market “tank” 10%. Others sleep through even a 30% market drop with a diversified portfolio. Only you can weigh the risks and financial impact of unexpected losses or accidents. This is also where you carry out point 1 and transfer this financial risk to a third party with financial protection.
Be wary of price comparison websites. We all know cost is one major factor when we make the decision for desired coverage against coverage constrained by budget. While cheapest is good, it is also frequently not the best policy to meet individual needs, save for some very direct plans like Term Life for death benefits only. Price comparison website potentially encourage consumers to focus on price rather than features and also limited by the range of products covered in its inventory. Most practical advice is, consult your financial advisor.
Answer questions asked by insurers truthfully. If you lie about your health conditions, especially past health incidents or caveats, you could be throwing money into the drain by paying premiums on a policy that may not be claimable should the unfortunate happens.
Read and understand your policy. I don’t deny that the entire policy booklet is exhaustive and takes quite a bit of effort to go through. Take time to read and familiarise with clarity on what is and is not covered. Misunderstandings are one of the main reasons leading to insurance disputes. Consult your financial advisor or insurer for guidance any time you are uncertain or unclear about.
Life insurance could be the base financial safety net for your family should anything unfortunate happen to you. If we take a fresh perspective of looking at Life insurance, we could re-look at leveraging it as part of our financial planning rather than staying off it like a plague.
I have done my own assessment and follow up with regular reviews on my life coverage. have you?