Taking out a life insurance policy can be a nagging feeling in the back of your mind as you get older. Should something happen, you want to make sure that your family and affairs are looked after. It may feel morbid to think about, but it's noble of you to take responsibility for what happens when you're gone.
Knowing that you should get life insurance is one thing, but knowing what to get and where to get it is another thing entirely.
In this article, we'll look at a few life insurance tips for you, the first-time buyer. You need to know what to ask, who to ask, and where to look in order to get the best policy. Let's dive in.
1. Term Life vs Whole Life
If you're completely unfamiliar with life insurance policies, then you may just assume that you pay into a plan for a certain amount of money that gets dispersed to your loved ones when you die. That's not the whole story.
There are two main types of life insurance policies: term life and whole life.
A whole life insurance policy is the kind that covers you for life. It gives you death benefits and cash value accumulation, which builds throughout the duration of the policy.
You usually need to do a health exam to qualify, but sometimes you can get it without one at a higher cost. Whole life is great for planning your estate.
Term life, on the other hand, is paid into for a certain period of time. It only provides death benefits and it only pays out if a death occurs during the term. It's the more affordable option, due to the nature of it, but can get more expensive as you age.
If your term is up, you have to renew to continue with the policy, but it can be converted into a whole life policy if you wish.
2. Go to the Doctor
If you've decided on a whole life policy, you'll most likely be required to take a health examination. You may apply for "no exam" insurance, but it's going to cost you several times more than if you just take the exam.
A no exam policy is useful if you've had major health issues and you don't think you'll be approved for life insurance. In this case, you should still talk to a professional to get advice on how to proceed.
If you believe yourself to be in fine health, you should go see your family doctor. Insurance policies are rated based on the general well-being and lifestyle of the applicant.
The reason that they require you to provide a report on your health is to have up to date knowledge of any issues that may arise. If you've quit smoking, for instance, you'll want that reflected on your life insurance application.
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3. Know Who to Name Beneficiary
You take out a life insurance policy so that you can take care of your loved ones. It's important to be very specific when naming one or more beneficiaries, as vagueness could result in many problems when you're gone.
If you want to provide for your family, it makes sense to name your spouse as a beneficiary. Depending on how old your kids are, you could split the money up, but you should always avoid naming a minor.
There are countless stories of a minor turning 18 and blowing through their inheritance on ridiculous things. The simple fact of the matter is people rarely know how to manage money at such a young age, so you shouldn't give them the opportunity to. Put the money in a trust if you want them to have it later in life.
Perhaps you've got a business partner that you trust. You can name them beneficiary so that your company can grow in your absence.
If you're specific and update the policy promptly when required, you can rest easy knowing that you'll avoid any family squabbles or mismanagement of your money. Naming a beneficiary is a major decision required for sorting out your affairs. For that reason, we have a much more detailed outlook on the subject in this article.
4. Annuity Payouts vs Lump Sum
Another important thing to consider in conjunction with naming a beneficiary is whether they receive the money in a lump sum or annually.
Most people imagine getting their inheritance as a lump sum. Once again, the direction of such an important sum of money shouldn't be taken lightly.
If you do leave your money to one or more of your children, giving it to them in annuity payouts would be much wiser than a lump sum, of course depending on their age and overall level of financial responsibility.
If it's your spouse or a business partner, however, it might be better to payout all at once in order to cover any costs that might be incurred when you're passed.
5. Living Benefits
Many life insurance policies now come with "living benefits". These are little asterisks in your policy that allow you to access the money a specific reason.
Features of living benefits are usually referred to as "riders" within the policy.
An accelerated death benefits rider, for example, is for the event that you're diagnosed terminally ill, and a chronic illness rider is if you're unable to do two or more activities of daily living.
In each case, the money is accessible to you to pay for any healthcare or assisted living needs during your illness.
6. Only Give Necessary Info
Insurance companies can be particularly insensitive when it comes to life insurance policies. If they don't ask you about something, don't give them the information.
They've been known to penalize you if you have a family history of disease or illness. If your grandfather died of cancer, this could affect your life insurance policy's rating, so keep quiet if they don't ask. This is just one of the many reasons we recommend working with a company like Insurdinary. The experts here will shop the Canadian market for you, ask only the necessary questions and will secure the best policy for your need.
7. Shop Around
Be sure that your insurance company is a legitimate operation. Too many times, innocent people are conned out of their money from bad policies, the elderly in particular.
Don't get talked into anything. If you speak to a trusted advisor ahead of time, you can get a better handle on what kind of policy is best for you based on what you can afford. There are plenty of good, honest insurance companies out there.
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The Best Life Insurance Tips
The only life insurance tips that really matter are these: do your research ahead of time and don't rush into anything.
If you know every nook and cranny of what you're getting into with the insurance companies, the more likely you are to get the best insurance policy for your needs and your beneficiary's needs.
For more informative articles on life and other kinds of insurance, visit our blog.