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What Are the Key Factors to Look at When Choosing the Right Life Insurance Plan?

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Life insurance policies are a smart way to offer your loved ones protection when you die. Should something unfortunate happen to you, your beneficiaries will receive a lump sum as stated in the contract.

That said, most purchase coverage, like whole life insurance Malaysia, for the extra benefits of a tax rebate and to secure your beneficiaries’ financial freedom.

Although there are many reasons for buying life insurance coverage, getting one can be tricky. But here are the key factors that can help you choose the right life insurance policy:

1.      Age

One key factor that affects the decision to choose a life insurance policy is age. A life insurance policy is less costly for young folks who have a long life expectancy and are not likely to die or get sick. In some situations, you might qualify for life insurance coverage if you are above a particular age.

Usually, the cost of life insurance premiums rises from 7% to 12% every time you grow older within one year. Your premium payment will remain unchanged yearly with a term life insurance policy. But with permanent insurance, it rises as you grow older.

2.      Types

Before you get life insurance, look at the different types available in the market. It is important to be familiar with what kind of policy to buy for your needs. The most common ones include permanent and term life insurance.

Permanent insurance involves making payments throughout the insured’s life. It is made to put lifelong protection in place for all your beneficiaries. It may include variable and whole life insurance Malaysia.

On the other hand, term insurance means paying a particular amount of cash every month for protection for a specified period. It can be one, five, ten, fifteen, or even twenty years. Once the period elapses, you may renew the contract to continue getting coverage. However, the rates will depend on your age at the time.

3.      Underwriting Considerations

If you have good health, then you qualify for a ‘super preferred’ or ‘preferred’ rate with most insurers. But if you have one or several health problems, don’t go with just one insurer because they provide coverage or another insurance carrier didn’t approve your application.

Insurance companies price their policies based on risks, such as personal activities, health conditions, or smoking.

However, now many insurance companies provide coverage to individuals with underlying health issues. This is especially true when those health issues are under control.

4.      Coverage Amount

In order to calculate the amount of coverage, you must know the difference between a want and a need. You don’t necessarily need to choose a life insurance policy, which guarantees you thousands of money at the expense of more premiums when your dependents don’t need that much.

Experts at Gibraltar BSN recommend that you go for something realistic. It should be something, which will effectively take care of the expenses of your family, including:

  • Loan EMIs
  • Schools fees
  • Bills
  • Other daily expenses

5.      Budget

So to speak, term insurance is less costly compared to permanent insurance. This is attributed to the coverage being effective for a specified period, plus the fact that no monetary value is built up in the policy.

With term insurance policies, you will need to choose a term over when you should be protected. When this term expires, new rates will be calculated if you opt to maintain the policy, and they may significantly increase.

In contrast, permanent life insurance policies set the cover in place for your entire life as long as you keep paying premiums monthly.

If you have a budget, you can consider term insurance. At times called a ‘starter’ life insurance policy, it will enable you to purchase a cover, which is convenient or fits your tight budget.

6.      Family Needs

It is important to estimate your family’s income needs when you are gone. Remember that it is much easier to manage your household with a regular monthly income. And so far, you may comfortably look at your family and ensure the household runs smoothly.

But when you are gone, your family will require another source of income. If your insurance only provides a lump sum, your dependents will need to reinvest it to safely generate monthly income.

Fortunately, some life insurance plans have monthly income options as a death benefit. This means your dependent will not need to put any effort into generating regular income.

7.      Payment Mode for Premium

Based on the life insurance policy you opt for, you can be eligible for paying a lump sum premium once or regular premiums periodically.

For the latter, you may opt to pay a premium on a semi-annual, quarterly, annual, or monthly basis. If you choose this option, ensure you go for payment mode, which is more convenient.

In some payment plans, you may choose paying premiums for a limited time. This is usually shorter than policy tenures.

8.      Insurance Rates

Life insurers look at two key aspects when determining the rates you pay for your policy: age and health. When buying a life insurance policy, the younger an individual is, the cheaper the coverage will be. This is because young folks are likely to be healthier, thereby, fewer risks to insure.

In addition, the rate you will be paying may depend on the kind of coverage you go for and how big your death benefits are. If you opt for term life insurance coverage, the duration of the term you consider will also impact the premium amount.

If you are able to afford term life insurance policies now but need a permanent life cover, many policies provide the conversion option. You may lock in low rates with a term life insurance now but later switch to whole life insurance when you start getting more income.

Final Touches!

Buying any life insurance coverage can be very overwhelming, especially if it is your first time doing so. However, the time you spend understanding your needs and researching the right policy is worth it.

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