Mostly, people are more aware of protecting their health, life, and assets, so the need for insurance has been increasing rapidly. However, you have to be careful while choosing one to get the best service that fits your needs. Make sure your family is fully covered with the right plan.
Shopping for life insurance might feel daunting because there will be different types and tons of products offered by servicers. Every product has its benefits to compensate for any potential losses caused by illness, accidents, and death. To choose the most suitable product, here are the things you should do before applying.
How to Choose the Best Life Insurance for Your Needs
1. Determine your Needs
One of the most important things to consider is to understand your insurance needs that will cover you. It helps you to find and choose the most appropriate one for you to use. From the product, you may get the maximum benefits. To adjust the financial security of your family or your needs, you can take a look at every provider in detail.
Every policy has a specific list of covered diseases, which vary between servicers. Some policies only focus on certain illnesses, such as cancer, heart attacks, and stroke. Others may cover a wider range of health issues. To make the right decision, you should consider several factors.
The first factor is family medical history, so you should know if there is a family member who has a history of illnesses like diabetes or cancer. If any, you may have a higher risk, so you should choose the security product that encompasses these conditions. You may consult with the insurer first before taking it out.
Factors like smoking, stress levels, physical activity, and diet may affect the risk of critical illness. You can also pay full attention to your age and recent health conditions since most products are available with different requirements according to age and health status. Review the list of covered illnesses brought by the product to meet your needs.
2. Learn Types of Insurance
Some companies only offer certain financial protection outside of the standard services. It means you may customize your plan by adding extra protection to your insurance policy even if they are the service that the company offers. Surely, it is accompanied by the imposition of an additional premium fee.
With this service, you get a complete service that suits you and your family’s needs the best. You can choose the one that you think you need the most. Therefore, the premium you have to pay is smaller. Every financial product is different from others, so you should understand the different policies to find the best option.
If you are looking for permanent coverage, Whole Life Insurance is the answer. Like its name, this type lasts your whole life. The benefit will be sent to your beneficiary whenever you pass away. It likely is more expensive upfront, but the benefits are secure in the long term. It also can support your loved ones any time you’re no longer beside them.
On the other hand, term life insurance is a temporary financial support that provides coverage for a set period. Some insurers offer multiple lengths, such as 10, 20, and 30-year increments. It’s more affordable, but the holder must pass through the set time frame of the plan to get the benefits.
There are also additional terms that you should consider. In some conditions, you should extend the length of your term life insurance policy after it expires. It’s important to be careful of the exclusions and limitations. Your payment history and the established guidelines of the insurer must also be considered.
Universal life insurance is quite different from both term and whole life insurance. This permanent policy has an investment portion, known as cash value. It grows throughout the life of the policyholder and takes place in a tax-deferred account at a stagnant rate. There is also final expense insurance with a smaller death benefit to cover funeral, medical bills, burial costs, and other end-of-life expenses.
3. Pick an Adequate and Guarantee Sum Insured
While purchasing health insurance, prioritize the sum insured you need. While a higher fund increases your premium, a lower sum is insufficient to cover all your medical expenses. It leads to increased out-of-pocket expenses. Furthermore, you should consider the age of the family members, your residence, and future inflation while choosing the right amount.
Not only adequate, but you should also ensure that the reputable company keeps a guarantee fund to safeguard policyholders and participants. The fund can be used to fulfill client obligations, especially in emergencies. It also serves as a benchmark for the company’s financial robustness.
Many ways you can calculate the amount you need. When you feel sure to get a policy, try to talk to a professional or agent to get the exact number. You may also do it independently using human life values. Based on the value of your future income, get 30 times your income if you’re around 18-40. 20x income for those who are 41-50. 15x income if you are 51-60. 10x earnings if you are 61-65.
After the age of 65, the coverage is based on your net worth rather than your income. For those who are above 65 years old, consult your needs with a professional agent. If you need to cover your children’s college expenses, you can multiply your income by 10. This strategy is quite simple because you only have to multiply your recent salary by 10 to cover college tuition and expenses.
As you know college isn’t cheap, so you should account for somewhere between $100,000 and $150,000 per child. If you average things out with 2 children, it would add $250,000 to the overall calculation. The method helps your children in the future to reach their educational goals.
To prepare future expenses, you can apply the DIME formula that adds to the future earnings. DIME or Debt, Income, Mortgage, and Education represent four factors that need to be considered while making a detailed calculation of your insurance needs. Just so you know that debt includes car payments, student loans, credit cards, and personal obligations.
By considering your income, you should pay attention to the amount of money you make in a year and how many years your family needs the money. You can determine the years until the youngest child graduates from high school. For instance, you earn $50,000 and have 9 years until your child graduates, putting down $450,000 for income.
You should also look at your last statements and pay off. For education, you can anticipate the college costs for every child, between $100,000 and $150,000 per child. With those aspects all up, you get your number. You may also set adjustments for any remaining savings and life insurance you have already carried.
4. Get Quotes
It’s also best for you to protect quotes for term life policies online, by phone, or via an in-person meeting with your agent. You can also start with simple online quote calculators, which offer ballpark calculations based on several quick questions. You can compare term life quotes through websites at once.
The chart makes it easier for you to compare the product rates for a 20-year term for applicants in good health. The annual cost of a $500,000 policy varies widely depending on the age and gender, from a low of $183 for women to a high one of $9,297 for a 70-year-old man. If you choose a higher coverage amount, it increases the policy costs.
Take note that the most initial calculated quotes may be revised up or down after you apply for life insurance. The online calculators only give you a rough estimate. If you want a precise price, you should require a more detailed personalized assessment, such as health, lifestyle, and specific needs.
Quotes for certain policy types are easily requested online, but you will not give the instant answers like you can for term life insurance. You may be asked to give your name and personal information so that an agent can contact you directly. So, don’t take the result as a whole picture.
5. Check the Benefits
While choosing the ideal life insurance, you should consider plans with its benefits. One of the benefits is tax-free under section 10. It allows the policyholder’s beneficiaries to get the benefit without any tax liability. Some insurance also has beneficiaries with a monetary assurance that can be designated for educational purposes, such as tuition costs, textbooks, supplies, transportation, and others.
6. Know the Reputation
Insurance companies must have a good or excellent reputation to ensure their credibility. You should evaluate the company’s history, track record, and performance in serving its customers over the past years. Also, make sure that the company is supervised by the finance services authority.
7. Ensure its License
Choose the company that has an official license issued by the verified association. The association conducts a licensing process that makes sure the company meets specific professional and ethical criteria. With an official license, the company follows ethical standards.
8. Learn the Service
With long-term coverage, it is important to evaluate the quality of the after-sales service, the services must include the option for an e-policy. Its system also makes sure that the product descriptions by marketers are accurate and easy to understand. It’s crucial to choose a user-friendly system, so you can access it easily.
Good insurance company typically has provision of customer service or after-sales services that are easily accessible. It is equipped with various communication channels, such as online platforms, websites, phone calls, or other digital media. Responsive and professional services prioritize reassurance and security.
9. Offer Easy Administration Process
Choose a company that has an efficient administrative process from paying and brings benefits, such as cashless or reimbursement systems. A company that has simple administrative tasks shows how good its commitment is. It means that they handle the customers’ insurance needs perfectly.
You should also learn about the applied system of the company. Some insurers use a cashless system or participant cards. It also could be a reimbursement for their services. These are different and you should consider them first while choosing the company. With a cashless system, you find it easier to pay for health services in the hospital.
This is because you only have to bring and show the card while registering at the hospital. Besides, you don’t need to deposit if you have inpatient treatment. You get the treatment quickly and easily. In the reimbursement system, you should deposit while registering for inpatient care.
You also must pay off all medical expenses at the hospital. Once the treatment is finished, claim the insurance by including a payment receipt. It is surely less comfortable since you can get sick at any time even when you don’t have enough money to pay for treatment at the hospital. That is why you can also add health insurance.
10. Offer Faster Claim
Another necessary thing to consider while choosing financial security is the speed and complexity of the insurer’s claims settlement process. When it comes to claims, make sure the servicer reimburses your claim faster through a smooth process. To have that, choose a modern company that has applied digitalization.
11. Understand the Premium
Before applying, you should understand the premium offered by the company product. Premiums are charges that must be installed, so the policy stays active. Not only monthly, it could be also per semester, year, or even once in a lifetime. After you calculate your coverage needs, make sure it doesn’t burden your family’s finances. Choose a more affordable one to avoid any life risks.
There are many things to consider before taking out life insurance, from adjusting to your needs, its types, service, quotes, benefits, to premiums. Choose one that fits your and your family’s needs and lifetime. Avoid an option that adds a burden onto your financial goals in the future. Don’t hesitate to discuss it with your agent.
