Assessing Your Insurance Policy: What to Look for in a Life Insurance Plan?

We are given different opportunities to prepare for unforeseen circumstances and life events, like saving money in the bank, building a substantial emergency fund, and getting our personal effects and documentation in order - however, these may not be enough if the sudden occurrence requires a huge amount of money.

These types of life-altering incidents are what an insurance policy can prepare us for. With a good policy that provides comprehensive coverage, you and your dependents can be spared from major financial setbacks, and can help provide for other needs that may arise. Unfortunately, there are people that only realize this once it’s already too late, and a costly emergency has already occurred.

Now, while it may seem tempting to apply for a life insurance policy immediately, you should remember that every major decision requires a certain amount of planning. Part of the preparations for acquiring an insurance plan would be to understand your financial goals and objectives, and research on insurance products that can help you achieve these. With the vast number of insurance providers in the country, it is crucial that you work with a company that makes your financial stability its priority.

Here are some of the things that you will need to closely look at, in order to get the most suitable coverage possible

As people have different financial targets as well as financial means, insurance policies offer different coverages and premiums to be able to effectively meet these various requirements.

Insurance coverage refers to the corresponding amount that a policyholder is covered for by a specific insurance provider, for unforeseen circumstances such as accident, critical illness or death. A rule of thumb is for clients to have insurance coverage that is equivalent to six to 10 months of their annual income to ensure that they can continue enjoying the quality of life they were accustomed to for a specific period of time. The premise behind this is that your life insurance will be taking the place of your annual income, in the event of a life-impairing accident or untimely death.

While this is a basic rule of thumb, it would still be best to look at your financial objectives so that you can get an accurate computation of how much you and/or your beneficiaries will be needing. Do you still have children in school? Are you still paying off a home or auto loan? Do you or any or your family members have a chronic illness that needs regular medical attention? These are some of the considerations that you will need to think hard about so that you do not end up being under-insured and under-prepared.

You may also consider using the DIME method in determining how much insurance coverage you will be needing:

  • Debt: This may refer to all the money you owe, such as housing loans, car loans, credit card debts, etc.
  • Income Replacement: There is no easy explanation for this, but an online write up said it best. “Consider the life expectancy of your spouse, dependents, or anyone who depends on your income. Do you want to replace your income for the rest of their lives?”
  • Mortality: Or simply, death. This may refer to the burial wishes and costs.
  • Education: Consider asking these questions: “Do you want to fund education expenses for your dependents? What about childcare? If you have children in daycare, do you want your policy to pay for their remaining years in daycare?”

Insurance premiums, on the other hand, refer to the amount that you will need to pay to enjoy your insurance coverage benefits. Premiums can be paid on a monthly, semi-annual, quarterly, or annual basis, depending on your capacity and convenience.

As with any other legal document, make sure to read through the terms and conditions of the insurance policy so that you fully understand what is expected of both parties, and be able to make the necessary clarifications if needed.

Simply put, the maturity benefit is the lump-sum amount that the policyholder receives upon the maturity of his insurance policy. The maturity benefit stated in your insurance contract is a pre-determined figure of what you can receive, but may also change, depending on the terms and conditions of your policy.

If, for example, you secured a 15-year life insurance policy, you will receive your maturity benefit after 15 years from the date the policy was signed, provided that you were able to pay all your premiums within this period. You may also receive certain bonuses, if the policy that you secured provides for such.

In addition, your maturity benefit may also provide a death risk cover. This means that if something were to happen to you within the policy term, your nominated beneficiaries will receive the corresponding pay-out, and secure their future in the aftermath of an unfortunate event.

If you were to ask, “What if I already have my insurance plan, but I’m willing to upgrade. What are my options?” Suppose you already have an insurance policy but are looking to upgrade - do you have options available to do so?

The good news is, most insurance companies have provisions to allow policyholders to upgrade their policy coverage. It would be best to discuss your plans with your financial advisor or agent so that s/he can advise you on the best time to make the upgrade, explain any potential changes in the terms and conditions and payment schedule of your new policy, and discuss when the new coverage provisions will take effect. Your financial advisor or agent should also inform you if you need to submit any additional requirements to facilitate the upgrade of your insurance policy.

Shopping for an insurance policy requires your utmost attention. By understanding its different features and conditions, you can be well on your way to establishing a bright and secure future for you and your loved ones.

If you’re still in the process of researching the most suitable policy for your needs, you may wish to consider Allianz eAZy Health policy.

Allianz eAZy Health is an affordable and renewable 5-year insurance product that features the only enhanced critical illness coverage offering in the market. Future illnesses expected to have an impact on physical and functional abilities will be covered, even before diagnosis (terms and conditions apply), giving the policyholder the opportunity to recover and make the most out of life. For more information about our various insurance and investment products, check out Allianz eAZy Health here.