1. Can I afford it?
When it comes to buying insurance, most people tend to think, more is better than less and this is definitely true to an extent. More coverage means more protection which means more peace of mind right? Well, only if you can afford to keep up with the premiums. Insurance policies are long-term commitments, and life policies can stretch over decades. A lot can happen over a long time, a premium that you can afford now, may not be what you can afford five years down the road.
Try to strike a balance between getting enough coverage to protect you and your dependents and the affordability of the premiums. A good way to measure the right amount of cover you need is by working out your current financial expenses and adding in any additional expenses you think you may incur in the event of serious illness or asking yourself how much income your dependents will need should you pass away.
Remember, if you fail to pay your premiums, your insurance may lapse. More cover is great, but less cover is ultimately better than no cover at all.
2. Does this type of insurance suit me?
As we pass through different stages in our lives, we tend to have different financial goals. A young unwed couple may want to save for marriage, parents with a newborn child want to save for his/her education while protecting their child and as we get older we start to think about retirement and how much we’ll need at that point.
Whatever policy you choose to purchase, should have a structure that reflects your financial goals. Let’s take the parents of a newborn child for example, knowing the rising costs of education while still wanting to protect the child in the event of their falling critically ill or passing on. In cases like this, one should purchase endowment policies which have an unlockable value after a certain period of time instead of say whole life insurance. This helps save for the child’s education while providing life insurance as well.
3. Do you know the terms & conditions?
It is often a common gripe that insurance companies don’t pay out or pay much less than they’re supposed to. Unfortunately, this is as much a problem with the insured as it is the insurance companies. As a consumer, you should pay attention to what policy exclusions come with your insurance. Exclusions are conditions whereby benefits would not be paid out, so it is extremely important to pay attention to them.
Common exclusions can include pre-existing conditions or out-patient medical services, which means your benefits may not be paid if you already had a condition before purchasing the policy and the policy may not cover outpatient treatment. Make it a point to read the exclusions, understand your deductibles, claim and age limits.
On the Insurer’s end there are more calls to simplify language to make things easier to understand.
4. Are you comfortable with your financial advisor?
Insurance is part of your financial plan, a plan that you will follow throughout your life. To be able to entrust your financial future and allow a financial advisor to guide you through it, a level of trust must exist between you the client and your financial advisor. Whoever you choose to serve you should always make you feel comfortable. The ideal advisor will
- Make recommendations in your best interest
- Allow you the time to make decisions instead of hard selling products to you
- Keep you updated on changes to your policy that are of concern to you, that you may miss out
- Arrange reviews from time to time that help ensure that the policies you hold are still the best suited to your financial goals
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