Do I need life insurance ?
Friday, October 31st, 2008If you are married, have children, a mortgage or a business then you would normally be advised to take out a life insurance policy. You can choose the sum of money you which to be insured for typically called the benefit amount of the policy. This is generally advised to be enough to cover your mortgage, any outstanding debts and provide for your spouse and children.
The cost of the premium is dependent on a number of factors. These include the amount of the sum assured you require, the length of the contract, and dependent on your current state of health. The insurer would also look at other factors such as height and weight ratios, whether you smoke or not and your family history if known. When applying for life insurance it may involve the provider asking for a medical report from the doctor of the person to be insured. It is important that when filling in the questions on the application form they are answered fully and truthfully as failure to do this may result in a failure to pay out upon making a claim.
Also when applying for life insurance you can choose whether you want the premium to be guaranteed or reviewable. The guaranteed premium is where the payments would be the same price for the term of the policy. The reviewable premium is reviewed every five years and it can stay the same, go down or go up. This is dependent on the insurer taking a number of factors into consideration such as their claims experience, investments and, costs of reassurance. The review is applied to all policyholders and not on individual circumstances. If the reviewable premium is chosen and it is increased at some point you normally have the option to accept the increase or reduce the amount of sum assured to keep the premium the same.
The insurance would pay out the sum assured when the assured person dies. It also normally pays out on the diagnosis of someone suffering a terminal illness. Normally the diagnosis would mean the assured would have less than 12 months to live. However the terminal illness would not normally apply for most policies in the last 18 months of the term of the contract. The plan has no cash value if you do not pay the premium.