Shopping of a life-insurance policy can be overwhelming, but going with the first offer that lands in your hands can be a recipe for wasting money. In reality, to get a worthwhile life-insurance plan, you need to shop around and go through a long procedure that may include medical tests, through investigation of your medical history as well as that of your family.
Although you should not put off buying life insurance, don’t rush. Many offers that seem reasonable may not be taking into consideration special advantages that can grant you significant discounts. In addition, don’t sign on the dotted line before you’ve fully understood all of the terms of your policy.
Here are a few points to keep in mind when you’re shopping for life insurance.
Permanent versus term
First, you will need to decide whether to buy a permanent policy (that covers you until you pass away) or a term policy. Although that is your call, there is a huge difference in price — permanent policies are a lot more expensive. That is why you need to think of why you need life insurance in the first place. Probably you have a family, and you’re concerned about how they will be able to survive if you pass away. If that is the case, a long-term policy — like a 30-year policy — probably will be a good choice. If your children are even infants, you’re giving them a replacement for your income for many years to come. Generally, adjust the term of the policy based on your individual circumstances.
Buy early
You don’t want to buy health too early, unless you have a reason for it. If you’re in your twenties, single and don’t have any dependents, you probably should wait for several years or at least until you have a dependent. However, don’t delay too much: Young people typically get a significantly lower rate, if they are healthy, non-smokers and have no-record of risky activities or sports.
If you take inflation into consideration, locking in a low premium for thirty years when you’re in your early thirties can be a great deal. But keep in mind that inflation also hit the value of your policy, so think big. Think how much you’d like your family to get now, then take an average inflation rate and calculate how much you’d like them to have if something happens any time between now and thirty years down the road.
Work a little
As with many things in life, doing your homework and being willing to take an extra mile can pay off. Check offers from multiple insurance companies and see if a medical test can get you a better rate, even if you’ve health issues. Having a truthful picture of your health status almost guarantees that your beneficiaries will be able to take advantage of you policy, if needed. So don’t fret or reject medical tests; they are generally in your favour. In addition, ask many questions and research the provider’s record of customer service and paying claims. Remember, you’re getting into a commitment that will last decades of your life, you should be sure that you’re satisfied with your partner through this journey.
Beneficiary
It may be a grim scenario to discuss, but you must understand how the policy value will be released to your family in case of your death. If your children are minors, you probably will need to have a will that specifies who will serve as their guardian. Speaking with your insurance rep to get the nuts and bolts about how this works can help you get other paperwork in order. If you think that your family will be in a dire need for that money, make sure that you make their life easier by getting your documents properly prepared.
Rania Oteify, a former Gulf News Business Features Editor, is currently a Seattle-based editor.
