Buying life insurance can seem like a daunting task. You need to find the right policy for your budget, for your lifestyle, and for those who will benefit from you taking out the cover. What’s more, each policy comes with its own set of terms and conditions, each one slightly different from the last. With so many different policies to choose from, it can seem like picking the right life insurance for you is like finding a needle in a haystack. On the plus side, having so much choice means you’re sure to discover the right policy for your needs.
So, if you’re looking to take out your first ever policy and are in need of a helping hand, here are 10 tips to help you along the way:
- Think about what you need the policy for.
Some people don’t put much thought into their life insurance. They think that the important thing is to have cover, but may not actually have a policy that suits their circumstances. Before you begin even looking for a life insurance policy, it’s important to make sure you know exactly when you want it. That doesn’t mean predicting the future, but it’s worth knowing upfront whether you need a starter policy, a decreasing term policy that shrinks over the term, or something that will remain the same for the next 40 years or so.
- Decide what you want the policy to include.
Once you’ve worked out the type of policy that you’re after, it’s time to narrow things down further and think about what you want the sum insured to pay for. For example, do you want a certain amount to be given to charity? Is a lump of it reserved for funeral costs? Do you have any outstanding debts like a mortgage that the money could settle? Deciding on details like these can save your loved ones from potential arguments and speed up the process.
- Calculate the amount of cover you need.
Depending on your budget and what you want the policy to cover, you’ll need to work out how much you want to be your ‘sum insured’. The general consensus is that this should be at least 10 times your annual salary in size. Other circumstances will also impact the amount of cover you need, from the size of your mortgage to the number of young children that you want your insurance to provide support for.
- Learn the lingo.
While there are countless different types of life insurance policy, there is something that they will all have in common: a lengthy set of terms and conditions. To make sure you’re getting the right policy for you, spend a little time researching the meaning behind all of the different words and phrases that they all tend to use. A life insurance glossary is a great way of getting to grips with terms like ‘annuity’ and ‘premium’. Learning the language of life insurance will help ensure you’re not caught out by any terms that you don’t fully understand.
- Speak to a financial advisor or life insurance advisor.
Another great way to demystify the language of life insurance policies is to speak to an advisor who is clued up in the terms and conditions. They’ll also be able to look at your personal situation and help you find the right cover for you. Be prepared for some personal questions and be honest! Determining the perfect life insurance cover will require details about your lifestyle choices, finances and even your travel plans.
- Shop around.
It may seem like choosing the right life insurance policy is a long process. Because of this, some people will find a policy that ticks every box and simply go ahead and purchase the cover, even though there’s alternative policies that cost a whole lot less. While some people’s circumstances mean they will undoubtedly need to pay a little more, it isn’t necessary to spend a fortune. There’s plenty of choice for manual workers, or those looking to get cheap life insurance over 70. You just need to explore the market.
- Look at the quality of the provider.
While making sure you’re getting a good deal may seem life the number one priority, you also need to consider the reputation of the provider. If the life insurance policy seems too good to be true, that may just be the case. The best way to avoid a potential scam – or having your money tied up in so many terms and conditions that your policy is basically a financial black hole, try and choose a well-known provider. Alternatively, have a browse online and see if anyone else has left a review of the company.
- Work out who your beneficiaries will be.
Although it’s something that’s quite difficult to think about, you need to have a long, hard think about who you want to be financially supported by your life insurance policy. Most likely, it will be the people who are currently impacted by your finances, like your partner and children. However, be aware that insurance companies will hold onto any money promised to children until they turn 18.
- Decide whether you’d like a policy with ‘living benefits’.
Having a life insurance policy with living benefits means that you’re able to access the benefit money yourself. This is still only possible if you meet certain conditions, such as developing a long-term chronic illness. The inclusion of living benefits has increased over the years, as people have found themselves living to an older age, but unable to take care of themselves properly as all of their money is tied up in the insurance policy.
- Make sure it’s a policy that you can amend.
If you’re being organised and purchasing your cover well before you expect to need it, then it’s a good idea to have a policy that you’re able to alter to suit your circumstances. Things like getting married later in life, finding a partner with their own children, and getting a new mortgage will all impact the amount you’ll want to be included in your insurance.