When you've decided you need life insurance, it's time to shop around
and get a good-priced policy that meets your needs. It's just as
important to shop around for life insurance as it is with any major
purchase. To make sure you get the right policy for you, there are
several questions you should ask before signing a policy contract.
General Questions
• What risks and events does the policy cover?
• What risks and events aren't included?
Insured events may include death, diagnosis of terminal or critical
illness, a requirement for long-term care, permanent or temporary
disability, and accidental death. It's important to find out exactly
what is covered before you sign anything, to avoid unpleasant
surprises.
• Can I choose anyone I want, or choose multiple people, as the
beneficiary of the policy?
Most people will choose their partner as the beneficiary of their
policy. However, it's usually possible to name more than one
beneficiary as long as they have an "insurable interest", meaning they
must suffer emotional or financial loss in the event of your death.
Therefore, you could choose to name your children as beneficiaries in
addition to your partner.
• How is a claim made and paid?
Your family or other beneficiary is the one who will make the claim,
so getting all the details beforehand will help them get it paid
quickly and painlessly.
Cost-related Questions
• Will you save money if you pay by direct debit?
• Will you save if you pay annually or quarterly rather than monthly?
• Is your premium subject to change?
You may be able to save money on your premiums depending on how and
when you pay them. Paying by direct debit or paying annually rather
than monthly will often reduce your premium slightly.
Because your premium rate is based on your age and state of health,
they're usually subject to change. This depends on the type of
insurance you get though, so before you sign a contract find out what
kind of increases you're likely to face in the coming years.
The Flexibility of your Policy
• What if you miss a payment—will coverage stop immediately or do you
have a grace period?
• What happens if you cancel the policy—will you get any money back?
• What happens if you decide to switch to a new insurance company?
If you miss a payment, you'll usually have a one month grace period,
during which you won't be charged interest. However if you don't pay
within the grace period your policy will usually lapse. If it gets to
this stage, you may have another grace period in which to resume
payments, after which you will be covered again.
Depending on the type of insurance you buy your premium cost may be
based on your current age and health, so you risk a premium increase
if you decide to change to a new company. Before switching you should
weigh up the benefits of the new policy and decide if they're worth
paying higher premiums.
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