Best Tips for Buying Life Insurance
It’s hard to think of your loved
ones or family struggling to cope. If you’re unable to fully support them, what
will they do? For reassurance and peace of mind, consider taking out a life
insurance policy that will assist you and your family in times of need.
Buying life insurance for the first time can be overwhelming.
You'll run into a lot of terms that you may not understand at first. The good
news is those terms are not very difficult to figure out once you do a little
research. These tips are designed to help you create an organized approach
toward investigating life insurance so that you can find the policy you need
without the hassle.
Income protection
‘Income protection’ can replace your
lost income if you are unable to work because you’ve been injured or are sick
for an extended period of time. There are different options available when
taking out a policy that determine what you are covered for and for how long.
These will be outlined in the product disclosure statement of the insurer you
chose to go with.
Total and permanent disability
(TPD)
‘Total and permanent disability (TPD)’
insurance can cover you, and people who are financially dependent on you, if
you can’t work due to permanent disability. TPD insurance can help cover
day-to-day expenses, outstanding debts and rehabilitation if you need it.
Trauma insurance
‘Trauma’ insurance can provide
financial support for everyday expenses and help cover the medical expenses
incurred when you’re diagnosed with a covered illness or injury. The number of
conditions covered and the definition for each one differs between
each trauma product, but it usually includes major illnesses or injuries that
affect your life in a significant way, such as cancer, a heart attack or a
stroke.
Death cover
‘Death cover’ is designed to help
cover any debts you have if you die, as well as any care and/or education costs
for your children or loved ones. Death insurance may also provide income to
help your family with day-to-day living expenses when you pass away.
Top tips for buying life insurance
The 'dos' of life insurance
- Think about your needs – based on your family situation, income and any debts you may have.
- Shop around the different insurance providers to find what’s best for you.
- Discuss your policy options with your family and loved ones.
- Read the product disclosure statement to makes sure you know what you’re being covered for.
- Ask the insurer if you’re unsure of anything – when it comes to insuring your life there’s no such thing as a ‘dumb question’.
- When filling out the insurance application, remember your duty of disclosure, make sure you do so carefully and truthfully.
- Keep a copy of any forms you fill out, and the product disclosure statement, for your personal records.
The 'don'ts' of life insurance
- Don’t pick the cheapest option just because it seems the easiest, take the time to find out what other options are available.
- Don’t skim through the product disclosure statement – read it in full so you understand all the benefits available to you.
- Don’t lie on any insurance forms you fill out, as this can result in your application or your claim being declined.
4
Core Life Insurance Tips
Know Why You Need Life Insurance
Life insurance is a serious
investment that shouldn't be made on the spur of the moment. Don't buy a policy
just because someone says you should. Many people hear ads about life insurance
so many times that they begin to feel an instinctive concern about needing life
insurance. The truth is, however, not everyone needs life insurance.
The purpose of life insurance is to
provide financial support for your dependents if you are no longer around to do it
yourself. If you don't have any dependents, you probably don't need to spend
money on life insurance. If you are contributing significantly to the financial
well-being of someone in your life, you think about protect from any financial
gaps that might occur if you no longer able to provide the same support. The
key is to understand why you need life insurance before you begin shopping for
a policy.
Understand the Type of Policy You
Need
There are two basic types of life insurance policies: life and whole life. Term life insurance policies last for a specified period of time. Term life is less expensive than whole life because it usually expires before the benefits are used.
Whole life insurance lasts from the
day you the policy until the day you die, no matter. A whole life policy is
more expensive because the coverage could last a few years or several decades.
Whole life policies can be borrowed against at a high interest rate, while term
life policies.
Know When to Choose Term
If you are in a situation your dependents will not rely on you financially forever, your best bet is probably a term life policy. For example, many parents choose term life policies that are in effect until their children move out and become financially independent. Once kids are, there is no reason to continue paying for life insurance. Your beneficiaries will rely on your contributions.
Know How Much to Buy
Understanding the potential needs of your beneficiaries can also help you decide how much insurance you should have. Don’t follow any “rule of thumb” guidelines you may read. Your needs are specific to you. Your decision will depend on the math.
How much money do your dependents
need each year and for how long? Because your children are likely different
ages, that number is different for each beneficiary. Calculate the needs of
each dependent annually, multiple times the number of years support is needed
and then add those numbers together so all dependents have what they need.
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