Life cover is a key aspect of financial planning and is designed to provide for your family if something were to happen to you. By paying your beneficiaries a cash lump sum in the event of your death, this insurance product ensures that they can settle outstanding debt, cover living expenses, finance future education, and more. If you're considering taking out a life insurance policy in the near future, here are a few things you should know.
Your age makes a difference
It pays to take out life cover when you're young and healthy. Why? Because life insurance companies consider your age and health (along with various other factors) when determining the cover you qualify for – and how much your monthly premiums will be. So the sooner you apply, the more likely you are to benefit from lower premiums.
It's important to be honest
When you apply for life cover, you'll be asked to provide information about your current health and lifestyle, medical history, and family history. It's vital that you're completely honest with your insurer – and that you don't withhold any relevant facts – because any incorrect information could affect a future claim.
You should read your policy carefully
Before you sign on the dotted line, go through your policy carefully so that you understand what it offers you. Make sure that you know the policy term (how long you'll be covered), what your monthly premiums will be, exactly what your policy covers, and whether there are any waiting periods and exclusions.
And keep your insurer informed
Once you have life cover in place, remember to notify your insurer about certain health, career and lifestyle changes, as these may affect the terms of your policy. So if you've changed occupations, stopped or started smoking, taken up a dangerous hobby, or plan on travelling to high-risk areas, let your insurance company know.
What about beneficiaries?
One of the most important decisions you'll make is naming your beneficiary – the person or persons who will receive your life insurance benefit when you die. For some, this may be as straightforward as choosing a spouse or adult child, while for others it may require more consideration. Here are a few factors to think about when making your decision: Are you supporting anyone financially? Who will be responsible for your debts when you die? And who will be responsible for your funeral costs? Bear in mind that if you die without naming a valid beneficiary, your life insurance benefit will become part of your estate.