If you’re buying a life insurance policy for the first time then you’re probably going to have a lot of questions you want answers to, and this isn’t a bad thing. Buying the wrong policy through lack of knowledge could leave you underinsured, paying too much in terms of premiums or without certain benefits that you really wanted included. Even worse though, you could accidentally leave your loved ones with insufficient money to live on following your sad demise.
So what questions should you ask before buying an insurance policy?
1. What’s the difference between the different types of life insurance policy and which is best for me?
There are various types of insurance policy and most people will benefit from one type more than the rest. For example, if you have a mortgage on a property but you don’t have a family to support then a term life insurance policy might be best for you. This type of policy covers you for an agreed number of years i.e. the length of your mortgage, and finishes when your mortgage is paid off. If you have a family to support though then a whole of life policy might be more beneficial. A life insurance advisor will be able to explain the different types of life insurance policy much more thoroughly so you know which type to search for initially.
2. How much life insurance cover do I need?
The answer to this question will depend on the financial commitments you have when you take out your life insurance policy. Obviously you’ll want things like your mortgage, your car finance, loans and credit cards paid off so you’ll need at least enough cover to settle your debts. You should discuss your cover needs with your advisor so you don’t inadvertently underinsure yourself.
3. What exactly does each policy cover?
Every insurer includes different features and benefits as part of their policies so something that is covered in one policy may not necessarily be covered in another. It’s vital that you find out what is and isn’t covered as standard for the life insurance policies you’re interested in so you can accurately compare the benefits you get from each.
4. Is it possible to add optional extras?
Some insurance companies provide a list of optional extras that can be added to a standard policy if required. This isn’t always the case though. If you find a policy that suits your needs but it’s missing a feature you really wanted then it may be possible to add it for a small additional cost. Your life insurance advisor will be able to tell you whether this is a possibility or not.
5. Can you convert the policy at a later date?
Your financial circumstances will almost definitely change in the future e.g. you may finish paying your mortgage, and you might find that the insurance policy you buy now no longer suits your needs. Some insurers will allow you to convert your life insurance policy into a more suitable type without needing to supply proof of insurability, but others won’t so ask the question before you buy.
6. How is a claim made?
This may seem like a silly question because at the time of a claim on your life insurance policy you will unfortunately have passed away. You should find out about the claims procedure on behalf of your loved ones though as the last thing you want is to leave them with a complicated claims process that takes months to sort out.
7. When am I covered from?
Again, this may seem like a silly question but a lot of people get confused about when exactly their policy starts to cover them against death. Does it cover you from the minute you sign on the dotted line or does it cover you from the time you pay your first premium? Maybe your cover starts when you get all the paperwork back, although this can take weeks in some cases and especially when life insurance is bought in conjunction with a mortgage.
These are just some of the questions you should make a point of asking your life insurance advisor before deciding on a policy to buy. Remember, a life insurance policy is designed to look after your family or financial affairs after you’re gone so you need to get the best one for your needs – and the easiest way to do this is to ask the people who know.