Once you’ve decided to buy whole life insurance, you’re ready to start looking for the best deal on a policy. To make sure you get the best deal—and that you fully understand the policy you’re buying—ask your agent or insurance carrier these questions (and any others that you feel are important).
1.What events does the policy provide coverage for? What isn’t included?
The most unpleasant surprise for your family—if they have to make a claim—is going to be finding out that, for some reason, the policy is invalid. To prevent these kinds of problems it’s absolutely vital that you fully understand what coverage your policy provides. Your policy might cover accidental death, but it might not cover high-risk sports, for example. If your favorite hobby is sky-diving or mountain climbing, that’s not the policy for you.
If you’re also buying critical illness insurance, be doubly sure you read the fine print and check what coverage applies. The number one reason that people get critical illness insurance claims turned down is simply that they weren’t covered for a particular illness, and didn’t know until it was too late.
2.Can you name any beneficiary, or choose more than one beneficiary?
People who buy whole life insurance tend to name their partner as the beneficiary. However, most policies will allow you to name multiple beneficiaries, as long as all the beneficiaries you choose have an “insurable interest” (this means they must suffer either a financial or an emotional loss if you die), so if you wish, you could name your children in addition to or instead of your partner.
3.How is a claim made?
Unless you’ve also bought critical illness insurance, your beneficiary is the person who will make a claim. Find out all about this process when you buy the policy, and make sure at least one beneficiary has all the necessary information.
4.Can your premiums increase?
Not all policies increase premiums based on your age and state of health. Increasing premiums make a big difference to the annual cost of your policy so this is an important question. Note, however, that even if an insurer claims they don’t increase premiums on individual policies, that doesn’t mean yours will never increase. If the insurance company increases rates for your class as a whole, you’ll end up paying more.
5.What happens if you miss a payment?
Most insurers will give you a grace period of at least one month to repay a missed payment, after which the policy lapses. Many also provide a second grace period to give you time to resume payments. Missing the second grace period usually means your policy lapses permanently.
6.Will you save money if you pay annually or by direct debit?
Many insurers offer small discounts for people who choose to pay their premiums in a certain way. Depending on the insurer you choose, you might be able to save money on premiums by paying annually, and by direct debit.
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