Most of the time, we are enticed into purchasing life insurance out of our mindfulness for our dependents’ security should we take up an unexpected, all expenses paid trip aboard Stygian Cruise Lines. The only question we ask is: do I have enough assets and investments that I can leave my family with to allow them to live comfortably? Other than that, people who are in the market for insurance usually clam up once they know how much premium they’ll be paying and then meticulously survey the contract for any fine print prior to signing.
But because life insurance is intrinsically a form of bet, here are a couple of questions you need to ask:
1. What’s your goal?
Are you worried about your family’s welfare? Do you have some unsettled debts which your family would have to pay off once you’re gone? Or maybe you simply want to gift a charity of your choice. These questions are necessary in order for you to choose the right type of insurance policy. While term insurance policies are the way to go if you simply want to guard your family’s financial security in case you meet an unexpected death, but this type of life insurance does not pay a claim. Hence, if you want to protect a long-term financial obligation, you might want to consider whole life insurance.
2. What are your options?
When making life insurance comparisons, it’s important for individuals to understand that there are two types of term insurance policies that are available—group and individual.
Group policies are often offered by companies to their employees and are named as such because the coverage is extended to a group of individuals. The advantage of this type of term insurance policy is that it’s easy to qualify for, often does not require a medical check-up, and payments are payroll deducted.
One disadvantage of group policies is that they aren’t portable should you decide to change jobs. If that is what you’re aiming for, an individual life insurance policy is advisable. While you might have to go through extensive physical exam and may even be subjected to background checks, you can choose to upgrade this term insurance to a permanent one or restructure the policy duration.
3. I didn’t die, now what?
The ironic thing about term insurance policies is that holders often become disappointed if they do not die within the policy duration because they then they don’t get anything. But there are a couple of options for policy holders:
a. They may choose to keep a policy during the end of the term but expect a rise in the cost of the premium.
b. Healthy and kicking individuals can also choose to go for a different type of policy.
c. Individuals who no longer have any financial obligation to protect, i.e. they’ve paid out their mortgage or successfully supported their kids through college, can opt to drop the policy and just let the coverage expire.
d. Consequently, individuals with lifelong financial obligations can opt to convert the existing policy to a whole life policy.