A life insurance plan is a long-term commitment that would impact your personal finance immensely.
For this reason, it is worthy to do a checklist as listed below or ask the right questions before getting one:
1. Assess Your Needs
- What is your life insurance for? Is it for income replacement in case something happens to you?
- Is it to protect your family? Or to make sure the education funding of your child?
- Maybe for retirement? Or estate planning?
Best to know the purpose of your life insurance first so the agent or advisor will be able to assess properly make a recomendation.
2. Know Your Budget
- How much can you set aside for the premiums?
- How much is this amount compared to my total gross annual income?
Your budget would influence the type of life insurance plan and coverage you will avail. Ideally, the budget should be between 10% and 30% of your total gross income for you to be able to maintain the premiums within the specific payment period.
Anything beyond that might just be unsustainable for you so you could also spend for other items in your personal finance.
Consider also if there is a modal premium factor, or a discount if you go for annual mode versus monthly (if available). This is usually available in traditional life insurance plans.
3. Understand the Types of Plans and Coverage
- What type of life insurance plans suits you best?
- Is it the traditional term, traditional whole life, or variable universal life?
Not all life insurance plans are the same, so it is advisable that you ask your agent for options. Read this article here to know more about the different types of life insurance.
Insurance riders and benefits also vary per policy. Life insurance plans have the death benefit as the default, but living benefits may also be included such as critical illness, accidental death, dismemberment, total and permanent disability, and hospital income, among others.
These add-ons may make your plan more complete but be mindful of the costs as well.
4. Check the Policy Terms
- Until what age will you be covered?
- What are the exclusions stated in the policy?
- What are the applicable fees and charges?
You may ask availability of the full proposal to evaluate the details of the life insurance plan.
In most cases, you will only get the policy contract after the approval of the application. And upon review of your policy you discovered a provision or clause that is not aligned with what you need or whatever reason you changed your mind, you have 15 days to return the policy which is called the free-look period. Formal communication like e-mail is needed to document the return of the plan.
5. Work with a Trusted Agent and Company
- Is your agent or advisor trusted, reliable, and accessible for after-sales services?
- Is the life insurance company legitimate, reputable, and stable?
- Are they in the business for the long-term?
You have every right to ask for proof about your chosen agent and company including future plans.
Experience dictates that some life insurance consultants or agents transfer to another company, migrate to another country, or resign after a few years. As mentioned, since life insurance is a long-term commitment, partner with someone who you could rely on when it matters the most.
Consider me as your life insurance agent!
My name is Dion Greg Reyes, a consultant and unit manager from AIA Philippines, formerly Philam Life.
Let’s be partners in life insurance! Know more about me, my portfolio, and my contact page here.
