The concept of life insurance is a fairly easy one to get our heads around. When we die, we want the insurer to pay out a lump sum of monies to our loved ones, and in exchange for that, we commit to paying a premium over to the insurer each and every month. The reason most of us need the security of having a life insurance policy in place is that we don’t want to leave our loved ones in a financial mess the day we pass on (life is tough enough without additional money worries). But, what we often forget is that a life insurance policy is a contract and therefore is legally binding. Before signing any type of contract you always make sure you have asked all the right questions, don’t you?
In this article we cover the 8 most important questions to ask before deciding to sign any life cover application document:
- When does my cover start? – This is an important question to ask because some insurers will grant you cover immediately, while others insurers will only have you covered once they receive the 1st premium.
- When is my first premium increase? – Usually, your life insurance policy is going to have an increase on the one year anniversary of the policy and every year after that. Did you know that?
- How much will my cover and premium increase by? – When your policy anniversary rolls around you need to know what the additional premium increase is going to be and how much your cover is going to increase by.
- What is the premium guarantee term? – Because insurers cannot predict what is going to happen 10 years down the line, they will put in place a premium guarantee clause. That simply means they will guarantee the pricing of the life cover for a period of 5, 10 or even 15 years, after which they reserve the right to hike up their life cover rates. How long is your premium guaranteed for?
- Who gets the money when you pass away? – This is probably the most important question because it is the very reason why you have decided to take out the cover in the first place. Make sure your beneficiaries are clearly noted at application stage (and check again once the policy has been issued)
- How does the claim process work? – When you pass away, who needs to be notified, what documents need to submit and what is the claims process?
- What are the exclusions? Because every insurance contract is a legal contract it has a set of terms and conditions attached to it. Have you read through those terms and conditions? Exactly what aren’t you covered for?
- What is the process if you want to amend the policy? At some stage, down the line, you might decide to increase or even decrease your life cover. What is the process surrounding policy changes?
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