What is the reason for choosing a particular policy?

Friday, February 19, 2010

The most obvious reason, of course, is price! This is always uppermost in the customer’s mind when it comes to buying just about anything, including life insurance. This being said, it is also very important to take other things into consideration.


Is the insurer strong?

Obviously in today’s day and age it is important to take into account a company’s viability. While it is not always the case that an insurer will simply go out of business due to regulations enforced by the governments in which they operate, there are other things to take into consideration. Weaker companies are often taken over by stronger ones because of poor investment results. After this, while policy terms are still honoured, your options will be hampered in the future.


What are the options?

Most insurers offer both term and life insurance. There will also be options by most insurers to convert from term to permanent in a specific time period. While most companies will allow conversion from one product to another, if a company is taken over, it might limit your options.

If you enjoy the occasional cigar, is it a problem?

Not necessarily, but you must always fully inform the insurer. If found out afterwards, then it will result in your policy being voided and your family will not receive anything. Also keep in mind that policies come with a two-year period of contestability, after which most claims will be paid out.

What is the importance of convertibility?

Over time, people’s health can generally deteriorate. When you do establish a term policy, they are based upon the health standard of the applicant at the time of negotiating. If you then drop your term policy later on in search of a new policy, you may find your options severely decreased.

Why is there such a huge variance in premiums?

While most people think the higher the premium, the higher the coverage – this is not always the case. Premium rates can have a lot to do with things, such as investment yields, average bond maturity and mortality experience. This, combined with the stronger insurers dropping their prices to attract customers, and there really is a great deal to research.

When considering life insurance, these are all very important things to look into, rather than just taking the cheapest quote.

Dominic Vines