Why the cheapest life insurance is not always the best
[social_share]Life insurance is a financial transaction. An amount of money is paid out in return for a larger amount of money being paid back if the life insurance is triggered. This means that life insurance can often be judged by price. Although this is certainly a valid factor, it should not be something that should be used as the sole factor.
The first thing that should be considered is the pay out if the insurance policy is triggered. Any cost of insurance should be judged in relation to the pay out that is made. It may be the case that only a small pay out is needed, and this will certainly cut the cost of the insurance. However the pay out that is needed should be decided before the cost of the insurance policies are compared.
It may be the case that the insurance is unaffordable after looking at the cost of the insurance policies. In this case then it has to be decided to cut the pay out. However this is the right order in which to judge the insurance. This means that adjustments can be made so that the lower pay out can be lived with. It will also give the opportunity to increase the life insurance at a later stage if there is more money available, rather than other saving or investment approaches.
It’s a very good idea to review the necessary pay outs on a regular basis so that the insurance is up to date. This should be done at least once a year and also at big life events such as marriage or the birth of a child.
Another cost saving measure that should be watched for are restrictive terms on what can be claimed. The very cheapest policies will usually pay out only on death. This may not be a good idea if the policy is designed to cover for an absent wage earner. In these cases the policy should also cover whether the person becomes so disabled that they can not earn an income.
The term of the insurance is also important. A short term will tend to have lower premiums than a longer term, but this can mean that a person is more exposed if there is an illness diagnosed or some other event happens and they have to renew the insurance.
Price is a valid factor in deciding a life insurance policy, but the other factors have to be borne in mind.
