Important Things You Need to Consider Before Applying for Life Insurance

Life Insurance by Life Stage

The choices you make today can impact your long-term health, wealth and happiness. Understand the important role Life Insurance can play in key life events.

Life Insurance Guides

If there’s one thing the current crisis has taught us, it’s this…

Life is a very fragile thing.

Unfortunate as it may be, situations beyond our control can affect us in ways we never imagined. And it’s clearer than ever that a person should consider a Life Insurance policy to help prepare for such unexpected events.

Perhaps you’ve already considered this, and you’ve put the wheels in motion to take out a policy.

But before you apply, there are a few things you should know. Understand all of these factors and your application is more likely to succeed.

Item #1 – A Life Insurance Policy

When you finalise cover with a Life Insurer, you’re entering into a contract. This contract typically exists between the insurer and the life insured or between the insurer and someone who has an insurable interest in the life of somebody else. For example, a wife would have such an interest in the life of her husband.

As part of this contract, you’re obligated to pay a pre-agreed premium. This may be a monthly or annual payment. In return, you have the right to make a claim on the policy if the subject of the policy (that is, the life insured) passes away.

Bear in mind that most policies will specify specific exemptions from cover, and that certain things (such as a non-disclosure of a health condition for example) may lead to the contract being void. Furthermore, failure to pay your premiums may have a similar effect.

Item #2 – Life Insurance Isn’t Just About the Monetary Side of Things

Think of your policy as an act of protection, rather than a valuation of your life.

Life Insurance isn’t just about placing a dollar figure on somebody’s life.

It’s about providing you with comfort and peace of mind in knowing that your loved ones will have a degree of financial security.

Your policy can help those you care about to overcome the inevitable financial issues that will arise. Depending on the types of life insurance products you hold, benefits may be paid should you die, be unable to work due to an illness or injury, or be diagnosed with a trauma (critical illness) condition. It will help you and your loved ones to deal with the financial burdens that would arise, so they can focus on more important issues.

Item #3 –Four of the Questions to Consider When Taking Out a Policy

There are several questions that you’ll need to ask yourself before applying for your policy. Four of the most important are as follows:

1. How much coverage do I need?

It may be a good idea to choose a figure that’s adequate to cover your family’s expenses. Take everything that you can think of into account, including:

Mortgages
Recurring bills
Additional expenses, such as groceries and clothes
The cost of a funeral

2. What are my circumstances?

Your current circumstances will affect your policy. For example, you may pay lower or higher premiums dependent on your working arrangements or job. But it’s also possible that your circumstances could change. If this happens when you already have coverage, you may need to apply for a new policy or update an existing policy. You should also consider your particular circumstances when deciding what type of life insurance cover would be beneficial for you, and how much you should insure for.

3. What debts do I have?

This is one of the most important questions to ask when determining how much cover you need. Ideally, your coverage will provide your family with enough money to clear any debts that you’ve accrued.

However, bear in mind that Life Insurance isn’t set up specifically to pay debts. With term life cover, the insurer will pay your nominated beneficiaries or your estate a lump sum upon your passing. It’s up to your beneficiaries how the money is spent (unless of course you’ve made special provisions in your will as to how certain parts of your estate are to be used).

Consider talking to your beneficiaries about your debt situation and aim to provide them with enough coverage to clear those debts and provide for them in the long term.

4. What does my family need?

The key here is to think about what your family will need in the future. For example, you may have children who intend on going to university. That may mean you want a policy that provides a sufficient sum insured to pay for their tuition and other expenses, in the event that you’re unable to do so.

Again, this is about considering your circumstances to help make certain that you aren’t under-insured. Remember that your family will have needs, some of which won’t arise until years later.

Item #4 – Your Payment Method

Ideally, you should consider working with an insurer that allows you to make automatic payments.

If you make manual payments, there’s always a possibility that you may miss a payment. Not making premium payments could potentially lead to the cancellation of your policy, especially if you don’t rectify the issue quickly. Most insurers offer a grace period if you miss a payment. But remember that this is a contract, and it may get cancelled if you don’t make your premium payments.

With automatic payment, you help to protect yourself from the unexpected cancellation of a policy due to non-payment of premium.

Item #5 – The Exclusions That Apply to Your Policy

Exclusions are events that your Life Insurance policy doesn’t cover or circumstances in which a claim won’t be paid under your policy. For example, life cover typically has an exclusion in place meaning that if you (as the life insured) commit suicide within thirteen months of taking out cover then the life insurance sum insured won’t be paid.

Always check the exclusions before agreeing to the terms of your new policy.

Item #6 – The Policy’s Affordability

Always consider shopping around to find premium rates which represent good value for your Life Insurance policy.

Affordability of your cover can be a concern. For example, if you run into financial issues while still alive, you may need to make cutbacks. If you have a policy that is beyond your financial means, you may choose to scrap it or to reduce your cover to save a little money.

Of course, this could leave you without enough coverage should a claim event occur.

Prepare Early to Apply Successfully

Preparation is the key to getting a Life Insurance policy that meets all of your needs. And the six items highlighted here are some of the important considerations for most applicants.

Remember that taking out Life Insurance is all about helping to protect your loved ones. Understand everything about your policy and you will be better placed to safeguard that they’ll have the peace of mind you want for them.

Now, you’re probably asking yourself a question…

To insure or not to insure?

That is a question that only you can answer. You may choose to get some professional advice, or to carefully consider your own needs and circumstances and deal directly with a Life Insurer like NobleOak who can provide you with general advice and product information.

This is general information only and does not take into consideration your individual circumstances, objectives, financial situation, or needs.