Shopping for life insurance can be tough, mainly due to the fact that no one likes thinking about their death, but also because there are many professional terms and definitions which most people are unfamiliar with. Nevertheless, having the right life cover can give your family financial security should the worst happen and therefore it is important to get. So, in order to make the process easier, we decided to answer some of the more common questions related to life insurance.
What is Life Insurance?
Let’s start with the basics: Life insurance is actually quite simple. You pay a monthly premium to an insurance company and if something should happen to you, the insurance company will pay a lump sum (a one off payment – assuming all is in order and no faults were found on your side) to whoever you have chosen to benefit from your policy (for example: your wife or children or both). You can choose to have a whole life policy (which covers you until you die), or a term life policy (which will expire after a set amount of time).
How Much Coverage Should I Get?
The ‘coverage’ is the amount that you benefiters get paid by the insurance company if something happens to you. There is no ‘right amount’ seeing how each person’s needs differ. For example, if you are the main financial provider and you have a young family you might want to consider getting higher coverage, because should something happen to you then your family will need as much money as possible. On the other hand, if you're single, or your children are already young adults and financially secure, a lower amount should suffice. As difficult as it is, try to think about how much money your family would need if you weren't around to provide for them.
How Are Premiums Determined?
If you're looking at life insurance quotes then you'll see that monthly premiums can vary by quite a bit. There are a couple of ways that insurers decide how much your premiums will be. The first consideration is the coverage amount – if you want a higher coverage amount, your monthly premiums will be more expensive. The second consideration is risk. The more risk the insurer feels he is taking the higher your premiums will be. That's why older people, smokers and people with medical problems will usually pay higher premiums. Of course, premiums vary by company as well – be sure to always get at least 2 quotes before deciding on your insurance provider and be sure that the quotes offer the same conditions, or otherwise put: compare apples to apples.
Why Does My Life Policy Have a Waiting Period?
It's very common that insurance companies place waiting periods on life insurance policies, which means that you have to wait a certain amount of time before the policy comes in to effect and you can make a claim. Usually, accidental death is covered immediately, natural death has a waiting period of around six months (during which you must pay premiums), and suicide often has a waiting period of two years. These waiting periods are designed to lower the risk for the insurance company. Insurers do not want people to apply for a policy when they already know they're sick or are planning on committing suicide, since that means the insurer will have to pay out a lot of money before it has received monthly payments from you, the insured.
Can I Pay My Parents Life Insurance Policy?
Technically, yes you can. With nearly all the insurance companies you will have to get consent to take out a policy from the person you are getting the policy for. This means that you can't take out a policy on someone without them knowing, but there is no problem paying their monthly premiums if you wish to and they have given consent. Another alternative is to opt for a policy that allows you to add others. Many insurers have family policies which let you insure yourself, your partner, your children, your parents and even parents in law or domestic employees.
Why Are There So Many Optional Extras?
It's very common for life insurance companies to offer more than simple life insurance. You may find that you have the option to add other kinds of insurance, including things like disability insurance (to protect you in case you are injured and can't work), or critical illness insurance (which will pay out if you are diagnosed with a serious illness). These extras simply give you more security and more coverage, though you'll usually need to pay additional premiums for them. But it can be cheaper to add options to your life policy than it is to buy all the policies separately. Be sure to only get what you need and to double check that you aren’t over insured or insured for the same things through your place of work.
Will My Premiums Change during the life time of the policy?
Maybe. That depends on the kind of policy that you choose. Different insurers have different options. Few companies will give you premiums that never change, but most will usually increase your premiums each year based on inflation and other factors such as age. Some companies allow you to have fixed premiums for a certain amount of time, whilst others will increase your premiums each year in return for more coverage. You'll need to research this when you're buying your policy.
Are Life Insurance and Funeral Insurance Different?
Yes, life and funeral insurance policies are different. Funeral insurance is usually for a lower coverage amount and is paid after a short period of time (usually within 48 hours of a claim). Also, the pay out is designed to pay for funeral services for the insured. A life insurance policy on the other hand will usually be for a larger amount, a claim may take more time to be processed, and the pay out can be used for anything (though some insurers place limits on this). A life insurance policy may or may not include a funeral policy as part of its conditions.
I am Ill/Over 50, Can I Still Get Life Insurance?
Yes, though it will probably be more difficult and you will almost certainly pay higher premiums. In some cases if you have a serious illness a company will exclude that illness from your policy. If you are diabetic, for example, your insurer may give you a policy but will not pay out if your death is caused by diabetes. There are insurers that specialise in both older customers and those with certain conditions, such as HIV or Diabetes, but you have to get a specific policy. Click for Diabetes insurance or HIV insurance.
How Should I Compare Life Insurance Quotes?
When you're shopping for insurance you should get quotes from at least 2-3 companies and see which company will offer you the best policy for the best price. For example, if company A offers you life insurance for R250 a month, but company B offers you life cover plus funeral cover for R260 a month, then company B might be giving you the better policy, though it's a little more expensive.
If you have any other questions, answers or want to share information, feel free to share in the comments section.
* Disclaimer: We do not represent any of the companies, products and/or services reviewed, published or advertised on this website. Nor are we financial, health or insurance professionals or services provider. If you request a quote or purchase a product/service, it will not necessarily be given by the company reviewed on any specific page. Any decisions you make based on the information presented is at your own discretion and we advise that before doing so, you consult with the relevant professional.
Main Subject: Life Insurance
