The ultimate guide to life insurance

Life insurance is one of the most vital pieces of your family’s long-term financial plan. It is a contract between an insurance company and a policyholder. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured’s death. The policyholder typically pays a premium, either regularly or as one lump sum. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. Other expenses, such as funeral expenses, can also be included in the benefits.

Choosing the best life insurance isn’t as simple for most of the people. You could lead to extreme confusion and frustration, because there are many types of life insurance designed for different circumstances. Let’s take a look at the most important information you need to know before buying a life insurance.

The different types of life insurance

There are many types of life insurance in the market. They have different features and each of these features affect the costs and the benefits. The major types of life insurance are:

  • Term life insurance. It is the simplest and usually the most affordable type of life insurance. It pays the people you choose a fixed amount of money if you die during a fixed period of time. If you don’t die within the time frame specified in your policy, it expires with no payout.
  • Whole life insurance. It pays a death benefit whenever you die, even you live to 150. There are three major types of whole life or permanent life insurance: traditional whole life, universal life, and variable universal life. There are also variations within each type.

These are not the only types of life insurance that you can find in the market, but these are the principals.

Factors that affect life insurance premiums

Life insurance is a great way to protect your loved ones financially, but it’s also a major investment. The life insurance premiums are different for every person and it depends on different factors which are used to determine how much of risk you will be. The following are some of the biggest factors that insurers consider when pricing out their policies:

  • Age. A younger person will make payments for many years before cashing out, so the younger you are, the lower your payments tend to be.
  • Gender. Since women statistically live five years longer than men, insurance carriers typically offer women slightly lower premiums.
  • Smoking. If you smoke, it puts you at a higher risk for all sorts of health ailments, so the premiums will be higher.
  • Health. If you are healthy, you will be charged less. The underwriting process for most carriers includes a medical exam in which the company records height and weight, blood pressure, cholesterol, and other key metrics. They may also require an electrocardiogram to check your heart in some cases. Some companies do offer “no exam” policies, but you can expect to pay more.
  • Lifestyle. You will be charged more if you engage in high-risk activities or if you have a relatively dangerous profession, such as mining, fishing or transportation.
  • Family medical history. You will be charged more if you have a family history of stroke, cancer or other serious medical conditions, because they may predispose you to these ailments.
  • Driving record. Many life insurance companies look at your driving record during the underwriting process and the last 3 to 5 years carry the most weight, so if you’ve improved your driving habits, you may benefit with a more favorable price.

These are the main factors used to determine the risk and the premiums, but some insurance companies can consider other factors.

The documents required to buy life insurance plans

When you go to buy a life insurance, you need to provide different documents. The list of the documents depends on your unique situation and on the type of life insurance you are going to buy. Collecting these life insurance documents beforehand, can help you speed up the process and get to the closing table sooner. Here’s what you can expect to need when you go to buy a life insurance:

  • Photo ID, such as a driver’s license.
  • Proof of address.
  • Proof of income.
  • Medical reports.
  • Other documents.

These could not be the only documents you need to buy a life insurance, so you need to be ready to provide all the documents the insurance company need.

The documents required for a life insurance claim

When you go to claim a life insurance, you need to provide different documents. The list of the documents depends on your unique situation and on the type of life insurance. Generally, a death claim would require these documents:

  • ID proof of the beneficiary.
  • Original life insurance policy documents.
  • Original death certificate.
  • Cremation certificate.
  • Legal succession paper, if any.
  • Hospital records and certificates, if the deceased died due to an illness.
  • Last attending physician’s certificate.
  • In case of unnatural death: certified police report, certified police inquest report certified post-mortem report or chemical analysis report, if any.

These could not be the only documents you need for a life insurance claim, so you need to be ready to provide all the documents the insurance company need.

Choosing a life insurance that is right for you

Choosing the best life insurance is not a simple problem, but it’s vital for your financial healthy family that you make the right choice and don’t get overwhelmed by the options. There are some basic things to consider and analyse before choosing the perfect life insurance for you. Here’s the list of what you need to do before buying a life insurance, so you can choose the right for you:

  • Understand the different types of life insurance.
  • Understand what affects the life insurance premiums.
  • Understand life insurance documents required.
  • Make a personal financial plan.
  • Compare different life insurance offers.

Remember, it’s always best to have as much information as possible, before you buy a life insurance.

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