Evaluating a term life policy
Looking into a proposal for a term life insurance policy may seem confusing, especially if it’s your first time to do so. For a lot of people, the columns of numbers and the technical jargon in the terms and conditions of the policy may very well look like Greek. Actually, term life insurance is one of the simplest.
So, here are a few simple tips to help you evaluate a term life policy proposal that has been given to you.
- Check if the company is reputable.
Go with a life insurance company that has a solid reputation, as well as high financial ratings. Remember that life insurance policies are long term concerns – you would want to make sure that you company has got what it takes to see their obligation to you 15, 20 or so years from now. Also, look into their claims statistics. There are some companies that show their claims statistics, some don’t. A company’s willingness to publish their claims statistics can be an indication of how high their claim statistics are.
- Check the premium rates.
Since term life insurance is a simple type of policy, it is easy to compare term life insurance quotes from different providers side by side. It can also be helpful to check how premium loadings are applied by different providers. One life insurance company may tack on a 100% loading to the standard rate while another life insurance company will only add a 50% loading on top of the standard rate.
- Check whether there are target-specific products available.
Are you in your 50’s? Why not look for over 50s life insurance. This may not necessarily be a term life product, but these products are usually designed with the specific needs of the target market in mind.
- Check if the policy is renewable.
A term life policy will only cover you for the specified term. A policy with a guaranteed renewable option allows you to renew the policy once the term ends. If you opt to renew the policy, you should be aware that the new premium will be based on your current age and medical condition. This means that the premiums may be considerably higher than what you used to pay.
- Check if the premiums guaranteed or not.
If the premiums are guaranteed, this means that you will be paying the same amount of annual premiums for the duration of the policy. Even when your health takes a turn for the worse, the insurance company is obligated to charge you the same premiums. However, once the term ends, this is where the changes in the premiums will be applied. The term life insurance policy that provides the longest guaranteed premiums provides the best value.
- Check if the policy is convertible.
Some term life insurance policies provide you the option of converting a portion of the sum assured into a permanent life insurance policy. This means that even if the policy’s term expired, you will have coverage from a permanent life insurance policy without needing to go through the underwriting process (such as submitting yourself to a medical exam).
- Check for freebies.
Does the term life insurance already include a terminal illness benefit or total disablement cover?
- Check the riders available for the term life insurance policy.
The riders can help you strengthen your life insurance cover. Read more details about strengthening your term life cover.
Updated on: 05.06.2013
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