There are multiple types of insurance, including life, pet, travel, car, and life insurance. People can even take out income protection policies.
Navigating your insurance options can feel overwhelming as you try to understand the benefits of each policy and the risks of not acquiring coverage. When you’re making decisions about whether or not to take out a life insurance policy, it’s essential to consider these factors to ensure you get the right policy to meet your needs.
1. Policies Vary
When you evaluate your life insurance needs, you can use iSelect’s policy comparison tool to review life insurance policies from different companies. You can use the information to compare the death benefit amounts, the monthly premiums, and any conditions that apply to the policy. For example, some policies may not pay benefits if you engage in high-risk activities or self-harm. Review your policy options carefully and be honest when you are completing your policy forms to ensure you qualify for coverage. Otherwise, your beneficiaries may not receive the death benefits when you pass away.
There are different types of policies, including whole life and term life. You must understand each policy and the conditions that apply. Some term life policies, for example, only pay benefits if you die within a specific timeframe.
2. Needs Vary
Your needs can vary widely throughout your life, and it is essential to assess them realistically. If you are single, you may only be concerned with covering your final expenses, such as the cost of a funeral and any remaining bills owed. If you have a spouse, you will want to ensure they receive enough money to look after their needs. Ideally, your policy will replace the value of your current salary for every year between the current date and your expected date of retirement. For example, a 55-year-old who expects to retire would need to take out insurance that covers ten years of their salary.
Your needs may change over time, and it is essential to review your life insurance policy at significant milestones and update your policy if necessary. For example, you may want to increase your benefit amount once you have a child. If your work income changes significantly, you may want to adjust your policy to reflect that. You may also want to revise your policy if you buy a new home. Your spouse could be left paying a mortgage and providing for dependents if the insurance policy is inadequate.
3. Cash Value
You may be able to access cash from your policy. Some policies increase in value as you continue to pay premiums. It may be possible to borrow or withdraw from the cash value accrued in your policy.
Some policies can be surrendered in exchange for a lump-sum cash payment.
You may opt for a life settlement. A buyer acquires the policy and becomes the beneficiary. You will receive less than the policy would have paid out when you died, but more than the policy’s cash-in value.
Individuals diagnosed with a terminal illness can pursue a viatical settlement. Viatical settlements are similar to life settlements because buyers purchase the policy for more than the cash-in value, and they become the beneficiary. Viatical settlements are usually higher than life settlements because the buyer expects to receive the benefits sooner. Individuals who pursue a viatical settlement may need to provide the buyer access to their medical records.
4. What Isn’t Covered
Life insurance does not provide compensation for loss of income due to a disability or illness. Policyholders are responsible for their medical or living expenses. Life insurance cannot be used to pay for your funeral arrangements or pay bills before your death. Your policy pays benefits to your beneficiary upon your death if your premium payments are up to date and policy requirements are met. Benefits may not be paid if the policyholder commits suicide less than two years after acquiring the policy.
5. It Provides Peace of Mind
You can be reassured that when you pass away, the people closest to you will not have their grief compounded by financial hardship. Acquiring life insurance is a way of taking care of your obligations and ensuring you don’t leave others with debts to pay on your behalf. You can also use your policy to contribute to causes that were important to you, and if you’re single but have a beloved pet, you can provide for their needs with your policy.