Choosing the Most Appropriate Life Insurance Policy
April 12, 2014
Choosing a life insurance policy is particularly important for people who are the sole or joint breadwinners in their families. Let’s say something happen to the breadwinner and the earning income dries up as a result. In that case the life insurance payout would support the family, for a while at least.
Here are some tips on choosing a life insurance policy
- If you are young you probably have ambitions and expect your earning income to increase over time. Then you should avoid the cheap option of term life insurance. And rather go for whole life insurance. Term life is appropriate for temporary debt such as student loans while whole life insurance not only protects your current and future assets, including your earnings, but also grows in value over time.
- Whole life insurance policies are generally quite affordable. Have your insurance broker help you to structure the policy so that all your needs are met. Your life policy should ideally pay out six to ten times the total of your gross annual earnings.
- Do not be greedy about the amount of life insurance you buy when choosing a life insurance policy. The cost of policy is related to the size of the payout as well as your age. Bear in mind that life insurance is not meant to pay off all your debts and support your family for the rest of their lives. It is simply meant to pay off your debt and help them over the first couple of months after your death.
- Shopping for life insurance is like shopping for any other product. Look around first, talk to people, look through the documentation and also trust your gut feel. Some insurance salesman can be extremely persuasive. Do not be swayed; you could live to regret it. Compare as many options as you can and weigh the pros and cons of each before signing on the dotted line.
More Tips for Choosing a Life Insurance Policy
- Do not be averse to talking to insurance brokers. They might be able to answer questions that you cannot find answers for online. A good broker will help you to save money and get better benefits from one of the large South African insurance houses like Liberty Life, Old Mutual and Metropolitan.
- You should take about three weeks to look around for a policy. Do not be in a rush. Start with the major insurance houses and then look to the smaller ones. The older ones have the advantage of massive investments, long track records and management stability. This means they will be likely to stick around for fifty years when your payout becomes due.
And More Tips
- If the circumstances of your life changes through death, divorce or even moving house or changing to a new job or career, revisit your life insurance policy to readjust it. As you get older so you insurance policy ages too and your rates rise. You might be able to “shrink” the insurance policy when children leave home, for instance. Do not waste money on coverage you do not need.
- At a push you should at least by a cheap term life insurance plan as opposed to a whole life plan that pays out when you die. A term policy is purchased for a specific purpose and for a specific length of time – hence the name term life. The premiums are typically lower than whole life insurance which is a lot riskier from the insurer’s perspective.
You do not know if you will be in an accident and disabled or if some other tragic event will take place that will leave you unable to work. In case this happens, make sure you protect your dependents by buying an appropriate life insurance policy.
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All info was correct at time of publishing