What to know about life cover

Questions to ask before buying life insurance

Posted  April 16, 2013

What is your life insurance IQ? Do you have the financial 'know how' you need to invest in a life insurance policy that will provide your family with the financial protection they need against your death? If your life insurance IQ is not up to scratch, then you have come to the right place. In this article we will take a look at the questions you should ask your broker or life insurance company before you sign on the dotted line.

Am I buying my cover from a reputable provider?
Make sure that you are buying your policy from a reputable provider, or in this case a reputable life insurance company and broker. In South Africa all financial services providers have to be licenced by the Financial Services Boards (FSB). You can check that you provider is registered with the FSB by contacting them on 0800 110 443

Am I buying enough cover?Working out how much over you need is not a task to be taken lightly. Ask your life insurance company or broker to walk you through what is known as a financial needs analysis. This is a method of calculating how much cover you need by assessing your current assets and liabilities and any life insurance policies you might already have. The terms liabilities includes, for example, your marital status, children and your debt.

How long am I covered for?If you have bought whole life policy then you are covered for life. If you have bought term then you are covered for a specific period of time, be it 5, 10 or 20 years.

When will my premiums go up and by how much?All policies will come with a premium increase but be sure to check how often increases will take place and by how much premiums will increase. If you are buying your cover through a broker check your monthly broker fees.

Are there any exclusions on the policy?  An exclusion is a circumstance under which your life insurance company will not cover your life for that specific condition. For example if you participate in a hazardous sport you might not be covered if you die while skydiving.

Are there any waiting periods on the policy?Some life insurance companies impose waiting periods for natural death and suicide. This means that if you die an accidental death or by your own hand during this time your life will not be covered.

Does my life insurance have an investment component?Universal life insurance is a type of whole life policy that has an investment component attached to it. If you are buying a universal life insurance policy ensure that the interest rates on your investment component are competitive and be aware of any administration fees charged by your life insurance company as well as any surrender fees, i.e. a fee you will have to pay if you decide to cancel your policy before a certain period of time.  Ask yourself if all of the above are competitive or if you could get a better deal elsewhere.

Find out more about life cover from 1Life.

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