When COVID-19 broke out, so did the number of new applications for life insurance. MIB Life Index reported that in the first half of 2020, life insurance applications rose to 1.5%. Buying life insurance for yourself, or your family might be one of the best decisions you’ll ever make, but it can just as easily turn out to be one of the worst as well.
Are you planning on signing up for an insurance policy? Here are the three things you must do before you shell out your hard-earned money on a life insurance plan.
1. Assess your insurance needs
There are a variety of insurance products available in the market and choosing which one to buy can be a daunting task. Most insurance companies have a minimum coverage of $100,000, although some may offer $50,000. You also need to determine if you’re buying a term or permanent life insurance. Term life insurance coverage only lasts for a specific period. In most cases, policies have minimum maturity of 10 years. While others can go for 20 to 30 years.
On the other hand, a permanent policy guarantees coverage for a lifetime. As long as you are making the monthly payments for your premium, you are covered. Permanent or whole life insurance can also become a savings account that earns interest or dividends. This type of insurance is generally more expensive. A rule of thumb in choosing a product is the higher the coverage, the higher premiums as well.
2. Set your goals
Are you trying to pay off debts and other liabilities? Do you want to ensure your children’s education fund after you’re gone? Or do you want your policy to double as your savings? Setting your financial goals for securing a policy will help you determine the right product for the coverage you need, ensuring the best value for your money. People who have not set their goals prior to buying a policy would say this is the worst financial decision they made.
However, you don’t have to go through the same nightmare. Set your goals according to your needs and capacity. You’d be throwing away your money if you fail to keep up with your monthly premiums—in case you terminate your policy before it matures, you’ll only be able to take a portion of your money back, leaving you at a huge loss.
3. Seek a financial expert
Financial planning on your own is a difficult venture and you need an expert to steer you through its complexities. Financial advisors and financial planners are two professionals often mistaken for one another. If you want to streamline and set your long-term financial goals, a financial planner is a way to go.
Whether it’s for your child’s education fund or an investment instrument for when you retire, a financial planner can help you choose a product specifically tailored to your needs. Most financial planners are well-versed in different financial concerns, including life insurance. You might spend more than you are supposed to by hiring a planner, but you’ll also be able to map out your goals for the maximum return on investment.
If you are someone who is about to purchase a policy, another thing to keep in mind is to read and carefully understand your policy and your insurer’s terms and conditions. You can easily be misled if you are not well-informed and have not done your due diligence. In certain instances, policyholders make low pay-outs due to hidden charges and clauses in their policies, and before they knew it, it’s too late.
Often, you might encounter an insurance agent looking to meet his/her quota and will sweet talk you into signing up for a policy without discussing the finer details of your contract. No matter how good the deal is, remember to always keep an eye on all the details of your policy and ask for clarifications if you need them. In this case, a financial planning lawyer can guide you, preventing you from falling victim to this kind of malpractice, while at the same time having your best interests and long-term financial goal in place.
Life insurance is not only a smart and a generally low-risk investment; if you’re your family’s breadwinner, it’s a tool that will help your loved ones go on after you’re gone. It can also be useful if you’re looking to grow your savings. Securing a policy is one of the biggest financial decisions you will ever make and you must ensure that the product you choose suits your needs and your financial capacity.