One thing that the pandemic has definitely taught us is that life is fragile and anything can happen when certain incidents are out of our control. To help prepare for such unexpected events, it is important to obtain a life insurance policy. This may have been a decision you already considered or may have just started to consider.
Here are some important things you need to consider before applying for life insurance:
Decide on the length of coverage you require
There are 2 types of life insurance based on coverage. The ‘term life’ is a life insurance designed to last for a particular term of time such as until your kids grow up or for the length of your mortgage. The other type of life insurance is permanent which fall under ‘whole life’ or ‘universal life’. This type of insurance is permanent coverage for burial expenditures or income replacement of spouse. You can look up life insurance Australia compare policies before making your choice.
Calculate the amount of insurance you need
One method you can use to calculate how much life insurance you require is by using the ‘DIME’ method. ‘DIME’ helps determine the various factors you need to consider before obtaining your life insurance which are: debts, income replacement, mortality and education. Mortgage, student loans, burial costs and funding of education loans for children fall under these categories.
Think about other objectives to obtain an insurance
Life insurance is not only to be used as monetary compensation for your family after your death. There are various other reasons to obtain a life insurance as well, so consider other reasons you may require one for. Permanent life insurance policies can be used as savings because they are lifelong and their cash value increases with time.
Decide on who to name as the beneficiary
The person you name as your life insurance beneficiary is the one who will receive the proceeds of your life insurance policy. You should take time to decide on who the best beneficiary of this policy will be. If you do have small children or minors, it is not advisable to name them as your beneficiary because they may not be able to receive the funds and it is also not advisable to name an estate under you as a beneficiary due to tax implications.
Talk with a trusted advisor
Once you have decided on the type of life insurance you want and the coverage you require, you can then discuss the procedure with someone who can guide you well and who has your best interests in mind. You can talk to an independent insurance agent to help you obtain your life insurance policy without any unwanted complications.
Insurance not only protects your loved ones once you are gone but can also be a useful tool before that as well. While taking these factors in to consideration, you should also take your circumstances and financial stability in to consideration as well. With these tips in mind, you can make effective decisions on the type of life insurance policy that is most suitable for you.