Contents

• Steps to Compare Insurance Plans
• Term Life Insurance versus Whole of Life Insurance: Whats Best for You?
• Compare Insurance Terms: Tips to Choose the Right One
• Comparing Insurance Companies: How to Find the Right One

When looking to take out a life insurance policy it is essential to waigh up all of the available options and ensure you find the best life insurance plan with all of the right inclusions to make sure that you are fully protected. That is why you need to work through the following four points which will help you choose the best insurance plan, understand all of the inclusions and help you choose an insurance company who will be there for you when you need them.

Steps to Compare Insurance Plans

The best life insurance plan is the one which will have all of the inclusions which suit your needs and your family’s goals, and one which also suits your budget. To help you with this decision, consider the features you need and want, and how they will affect the cost and the type of policy you choose:

• The right amount of cover. It would be devastating to be paying life insurance premiums all of those years, only to find that the benefit the policy pays is not enough for your family to cover their bills and pay for their lifestyle. Therefore, a good rule of thumb to work out how much your life insurance plan benefits needs to be, is to choose a policy which is worth seven to 10 times your annual income. If you are a stay at home parent or spouse, then your life insurance plan should cover the cost of hiring people to help run your household and look after your children.
• Additional coverage. You may also want a life insurance policy which covers more than your income, for example, a benefit which helps your family pay medical or funeral expenses after you die. You’ll also want to make sure your children can afford to go to the private school or the university you hoped they would, and that your family can pay out the mortgage so they don’t have to leave the family home.
• Your premiums are based on your age and your health. When you sign up for a life insurance plan you will usually have to undergo a physical exam and the medical underwriter will also take into account your age and your medical history when calculating your premiums.
• Life insurance and pre-existing conditions. Even if you are older or have a medical condition you can still find affordable life insurance cover. Some life insurance companies even specialise in insuring people with certain pre-existing conditions such as cancer survivors.
• Your policy doesn’t need to include your children. Just because your children are younger, it doesn’t mean the savings in life insurance premiums are comparable. As a result, you would be better able to protect the financial future of your children if you were to set up a savings or investment account for them, unless your child is a primary income earner in the family, and the family depends on their income to survive.
• Think about your living will. When you are organising a life insurance plan it is a good time to also think about what would happen if you didn’t die, but were unable to look after yourself. This is when you need to look at setting up a living will, which is also known as an advanced health care directive, and governs what you want to happen at the end of your life. For example, the document gives you the right to accept or refuse certain end of life care such as artificial respiration. You may also want to name an advocate or health care power of attorney who can make decisions on your behalf in a crisis if you are unable to do so yourself.

As you assess your needs for a life insurance plan, a good place to start looking for coverage is through your employer as they may be eligible for a low rate group policy by covering all of their employees. While this can be an affordable option you need to make sure you are still getting all of the features you need and want.

You can also benefit from these tips if you already have a life insurance policy, because you should regularly review your insurance, as your needs can change to ensure you have the best coverage possible. For example you may have gotten divorced or married, you may have paid off your mortgage, bought a more expensive house, had your parents move in with you or had your children move out of home and so you need to change your beneficiaries and maybe even your policy amount. You can update your life insurance policy by contacting your provider for a quote on the cost of the update, and take the time to shop around for a provider who would better suit your new needs.

Term Life Insurance versus Whole of Life Insurance: Whats Best for You?

There are two main types of insurance policy you can choose from, and your choice will depend on your age, the amount of cover you want and how much you can afford to pay for your insurance.

The first type of life insurance to consider is term life insurance which covers you only during the period you are paying the premiums, for the specified term. There are three ways you can take out a term life insurance policy:

• Level term. With this policy you will pay a fixed premium for 10, 15 or 20 years which can be a financially sound option as your premiums are protected against the cost of inflation, and premiums won’t rise if you experience changes with your health either. At the end of the term you don’t make any more payments and your cover ceases, so you can insure yourself while your children are young and your mortgage is high, and cease the insurance as your commitments decrease.
• Annual renewable term. In this instance you can renew your policy regularly, but each time you renew the premiums will increase.
• Decreasing term. Over the course of this policy the death benefit will steadily decrease which can be useful as it costs you less over time, and as your commitments decrease, your children grow up and your house is paid off, you don’t need a benefit amount which is as large.

There are also a number of different variables you can choose with whole life insurance too, which include:

• Whole life insurance. A whole life insurance policy will cover you for your whole life, charging you a fixed premium each year. The premiums will usually be a little more expensive than those for term life insurance, but the higher premiums are justified because the difference in the premiums is kept in a surplus account which earns interest and accumulates a cash value. Then as the amount in your accumulation account grows, your premiums go down and so in some cases you can eventually use the interest earned on your accumulation account to pay your premiums and you don’t have any out of pocket life insurance expenses, but you remain covered. Just remember that a whole life insurance policy is not the most desirable investment because while the insurance provider has your funds invested in high interest stocks and bonds, you are earning a comparatively low interest rate.
• Universal life insurance. This is a type of whole life insurance with better investment benefits because in the years where the insurance provider earns a greater profit from the funds in their customers’ accumulation accounts, they pass on that extra interest income to you. However, just be aware that if your insurance company makes an overly optimistic assumption about their returns, you could end up paying more than you had expected.
• Variable life insurance. In this case your accumulation account funds are invested in sub-accounts which look like mutual funds. While legally your investment can’t be in mutual funds, they do carry the same risks.

Just keep in mind that some less than reputable insurance companies will try and persuade you to sign up for universal or variable whole of life insurance, promising a high initial rate of return, and therefore lower annual premiums. Therefore, you need to be wary of any insurance company offering universal rates higher than the 30 year Treasury rate, where variable insurance is unlikely to beat returns of more than 10% to 12% a year.

However with the right whole of life insurance policy you can pay your premiums and accumulate savings and if you die your beneficiaries can cash out the policy, or you can cash out the policy to access the accumulation fund, or borrow against it. just remember that if you cash in your whole of life policy to access your accumulated funds your insurance usually becomes void – it is an insurance policy or an investment, it’s not both.

Compare Insurance Terms: Tips to Choose the Right One

If you are looking to save some money on your life insurance policy you can start by looking at when and how long you actually need coverage. Customising the term of your life insurance policy can make your coverage more useful, relevant and affordable, but just make sure you are adjusting your insurance plan in the right places.

First look at the terms which are available as you can often choose from a term as short as five to 10 years which is usually long enough to allow you to get ahead on your mortgage, earn a raise in your job and have the kids grow out of some of the more expensive times in their life. Just remember that at the end of the term your policy is void, so you don’t want your life insurance term to expire before you’re ready. Usually you will have to renew a new term for your policy at a new higher premium rate, unless you look for a policy which has an option for renewal.

The cost of a term of life insurance depends on factors such as your age, your health, your lifestyle and your job, and before you can be approved for a policy you will need to complete a thorough questionnaire and undergo a thorough medical test. Therefore to find the best life insurance policy for your situation you will need to shop around for the best price, as not all providers view and assess risks in the same way.

Comparing Insurance Companies: How to Find the Right One

Choosing the best life insurance company for your coverage is as important as choosing the right policy to ensure you and your family have the best coverage possible. There are hundreds of life insurance companies you can choose from, and you need to make your decision based on the following factors:

• Strength. Check the strength and credibility of a life insurance company you are considering before signing up, to make sure that they will be there for you when you need them, and that they will approve your claim. You can check the background information of an insurance company with the state insurance department.
• Credibility. Check with an insurance rating agency or the insurance department in your state to find out more about the background of an insurance company. You can also consult other customers and their agents.
• Finances. The financial situation of the insurance company is also important, and is based on the performance of the company’s stock, their profits and major business decisions the company has made. This information will tell you about the claims history of the company and how quickly they pay out their claims.

Feeling comfortable with a life insurance company is important, because you need to know that your family will receive a benefit payout if you die, and that you haven’t been paying all of those premiums for nothing. Unfortunately many people don’t take out life insurance because they don’t believe that their claim will be paid, as they’ve heard a horror story of an unscrupulous insurance company who scammed their customers.

However, a reputable insurance company, and one which you have research thoroughly and carefully, must honour a life insurance contract agreement. No one else has an obligation to take care of your family and to avoid your family having to live on merge government handouts, make sure that you can continue to take care of your family with the best life insurance policy possible, even when you’re no longer around to look after them yourself.

Contributed by Greg Tobin authorised representative of AAA Financial Intelligence LTD AFSL: 312478.