B uying a life insurance is an important decision. A life insurance policy is not merely a tax saving instrument but it is also an essential investment for future need. There are many insurance companies providing life insurance policies with varied coverage, limits and exclusions. If you are a layman or new to the concept of insurance, then a thorough understanding of life insurance policies and terms is important.
Moreover, a well-thought decision to buy life insurance not only makes you confident about your financial choices but also helps you build a corpus for any unforeseen eventualities in the future. Life insurance can be a complicated topic for many, and it is always good to seek help of an insurance advisor for better decision making.
Here are the top ten questions that you should ask your life insurance advisor/agent before investing in a life insurance policy:
1. What is more beneficial: Whole life or term life insurance?
One of the primary decisions that must be made is whether you should invest in a whole life insurance plan or a term life insurance plan. Though each of these plans have their own benefits and disadvantages, a whole life policy is better for building cash value whereas a term life policy is less expensive and easily affordable, initially.
2. Is the insurance premium fixed or variable?
Another important question that you, as a policyholder, should ask your life insurance agent is whether the insurance premium on your chosen policy will be a fixed cost premium or a variable component. Mainly, the premium depends upon the type of policy chosen and the annual rate may be fixed or it may increase over time. It is necessary for you to know what you will be expected to pay as premium throughout the tenure of the policy.
3. How much coverage will I need?
It is absolutely fine to ask your life insurance agent’s advice about the type of coverage you should buy. An agent can look into your monthly income along with your family’s lifestyle and cost of living to help determine the correct level of coverage for you.
4. Is the insurance policy convertible?
A convertible policy is the one that is initially purchased as term life and later converted to whole life insurance depending on your needs. Also, you can convert the policy only if your insurance service provider permits the same by charging a nominal fee.
5. Will my term life insurance policy be renewable?
A term life insurance policy usually has a fixed duration or period of time – between 12 months and 30 years. Depending upon your requirement, you can either extend or renew your term life policy after its expiration date. However, before the renewal of your term life insurance plan, certain insurance providers may ask you to undergo a medical check-up and re-qualify to meet the company’s requirements for physical health.
6. What are the exclusions on my chosen policy?
Exclusions in life insurance usually include non-accidental or natural causes of death. In such cases, the insurance company has a list of exclusions and your policy may not pay for natural death.
7. How can I cash out my whole life insurance policy?
Cashing out means a loan, and if you plan to cash out your whole life policy, then you may be required to pay back the borrowed amount along with interest. Any loaned out amount will be deducted by the insurance company from the policyholder’s life insurance benefit in case the policyholder pass away before the loan is repaid in full.
8. What is the accidental death rider?
The accidental death cover/benefit/rider can be added to your policy to ensure greater benefit in the case of accidental death. This can be included as an add-on by paying extra premium.
9. What is the accelerated death rider?
The accelerated death rider lets the policyholder receive benefits from his/her life insurance before death. It is an additional and optional coverage, and benefits can be paid if the person becomes critically ill or needs long term medical attention.
10. What happens if I miss paying my premiums?
Sometimes, the policyholder may miss out a payment due to financial difficulties or some other circumstances. Many insurance companies provide a window period of 30-31 days to make the missed payment. If it is a once off then your policy is not affected, but if you do not make the payment within the grace period then your policy gets cancelled and all the benefits are forfeited by the insurance company.
Therefore, it is important that you consult a life insurance agent before investing in a life insurance policy. This will not only help you understand your needs deeply, but will also allow you to focus on savings, determine premium costs and maintain a corpus for the future.
This content has been written for the insurance buyers those are buying life insurance plans from agents. However, the author recommends all the users to compare insurance plans before buying one. Online comparison portals can offer lower premium amount with respect to the insurance plans.