Getting insurance as early as you can and whilst you are healthy makes sense, as older people and those not in the best of health pay higher rates for life insurance. If you wait until you are unwell, the cost of life insurance could substantially increase, and could even be difficult to obtain.
Get healthy
With some policies the price you pay for life insurance will depend on your age, your health and your habits.
Permanently stop smoking, and after 12 months and most insurers will upgrade you from "smoker" rates to non-smoker rates – which can mean significant savings on your premium – in some cases as much as 50%.
Avoid Hidden Fees
Before you sign up, ask a simple question: What's this going to cost me? Make sure there are no hidden fees that are added to your premium.
Add benefits to your main policy
In some cases adding benefits to your main Policy (for example adding Serious Illness to Life Insurance) can be more cost effective than having two Policies.
Pay attention to payment terms
Most insurers allow you to pay monthly or annually. Keep in mind that some insurers could charge you extra for paying monthly. With Guardian Insurance you can you choose to pay your premium monthly or fortnightly and no extra charges are incurred.
Check to see if your policy is guaranteed renewable – that means that the insurance company cannot cancel your plan due to changes in your health or lifestyle, and it will stay in force until the expiry date, or until you decide to cancel it, or if you do not continue to pay your premiums.
Check limits on benefits payable or waiting periods which could be imposed in certain circumstances.
Of course, if you’re going to buy life insurance it’s important to make sure you’ve got enough.
But, how much cover is enough? Some financial planners say you need enough insurance to replace five to seven years of your salary. They also say that If you have young children or significant debt, you should bump up your coverage so you have enough to replace as much as 10 years of your salary. That means a person making $50,000 a year should have anywhere from $250,000 to $500,000 worth of cover or more.
Whilst that may sound like a lot of money, remember, most people want enough life insurance to make sure their family can continue to live their current lifestyle even if a breadwinner passes away.
Here are some questions to consider when deciding how much insurance you may need:
- How much money will be needed for your funeral?
- How much financial support will your dependants need?
- How long will they need this level of financial support?
- Do you have any once off obligations, such as a mortgage, or car loan?
Factors to consider include whether your surviving partner will have childcare expenses or school fees to take care of. Do you have other assets on which to draw? Many people also believe that they are covered through their Superannuation, but the fact is in most cases it’s simply not enough. So check your cover under your Super, and make sure you’re adequately covered.
The bottom line is buy enough insurance to meet your needs
Life insurance is no place to skimp, especially when it is now so easy to get, and affordable.