Investing in life insurance is a smart idea. Whether it’s for the benefit of your partner, your children, or even yourself, having life insurance by your side provides a valuable safety net for the future.
However, deciding to investigate life insurance policies is one thing. Actually choosing a suitable policy, on the other hand, can be rife with complications. What does all the confusing jargon mean? Are there any special terms and conditions that need to be carefully combed over? Have you forgotten to think about policy additions?
It’s easy to feel intimidated by the seemingly complex process of purchasing life insurance, but luckily, there’s a lot of information available these days that can help to ease with the decision making process. This checklist is just another one of those sources that will set you on the right track when it comes to remembering all the bits and pieces of life insurance. While it’s still important for you to contact your insurer for any specific policy-related questions, the following tips can act as a handy reminder of things to look out for when you’re still shopping around.
Stepped vs. Level Premiums
There are many different types of life insurance, and depending on the kind of cover you’re looking for, you may be asked to choose between having a stepped premium and a level premium. There is a significant difference between these two types of premiums, so it’s important for you to have a good hard think about what would be the most suitable option for your lifestyle. Stepped premiums increase each year as you get older, but are cheaper for you in the beginning, whereas level premiums don’t change as you age, but are more expensive to start with. It’s always a good idea to weigh your options against your present and future needs. If you’re intending to have life insurance for a long time, for example, level premiums might be the more cost-effective option for you.
Observe the Duty of Disclosure
It might have a fancy title, but the Duty of Disclosure simply means that you should always be honest with your insurer. Upon applying for an insurance policy, you may be asked questions about your living situation, your hobbies and interests, your past medical history, and other details about your overall lifestyle that could be relevant to your insurance application. It’s extremely important for you to always answer these questions as completely and truthfully as possible. If you answer fraudulently, your insurer may refuse your application, or worse, refuse a claim you might need to make down the line.
Beware of Underinsurance
Underinsurance is unfortunately a common problem in Australia, with only an estimated 4% of the population having adequate life insurance cover for themselves and their family. Underinsurance occurs when people don’t take out enough insurance to cover their or their family’s living costs for the future. Being underinsured means that, in the event that you pass away or suffer a terminal injury or illness, your beneficiaries (ostensibly, your partner and/or children) will be in a financially vulnerable position. It’s always much better to be safe than sorry, so carefully ensure that your calculation of your family’s future financial needs is as accurate as possible.
Reduce Your Premiums
While it varies with every insurer, did you know that there are several ways in which you can attempt to reduce your premiums? The younger you are when you purchase insurance, the better your health tends to be, and likelier it will be that your premiums are cheaper. This is why it’s important to get in quick and start shopping for policies as soon as possible!
Following this same line of reasoning, if you regularly engage in any extreme sports or travel to certain exotic destinations around the world, you might find that you’re ineligible for some insurance discounts. If you’re looking for a cheaper premium, it might be in your best interests to refrain from these kinds of activities, as insurers may otherwise regard you as a high risk.
Ask Plenty of Questions
When it comes right down to it, life insurance can be a tricky business, and it’s normal to feel confused at first. This is why it’s always imperative that, once you’ve tentatively decided on a specific policy, you ask the insurer all the necessary questions that will allow you to exactly understand the extent of your cover. Remember to review your Product Disclosure Statement (PDS) very carefully so that you’re aware of all the terms and conditions. It could even be beneficial for you to create lists of any queries or special terms that you need your insurer to explain or elaborate on for you. The safety and comfort of you and your family is of utmost importance, so it really does pay to be diligent when it comes to fully understanding your life insurance policy.
The Final Word: Checking Off The List
There’s a significant reason why life insurance can seem complicated: it does often contain many different facets and fiddly details, and this is all for the purpose of adapting to the needs and priorities of different people and their families. The right kind of life insurance for you and your family should cater to all your present and future financial concerns. This is why it’s so important to shop around to get the best deal, and to read all the fine print once you’ve chosen a suitable policy.