LIFE insurance policies provide security for persons in a world full of uncertainties. But the decision on which policy to purchase, particularly for first-time buyers, isn't always an easy one.
With a variety of policies on the market, insurance advisors suggest an evaluation of one's goals and needs before embarking on a purchase.
“What the first-time buyer should consider is coverage,” says insurance broker Conrad O’Brian, adding that as an individual’s financial life develops, the policy should be converted to suit the need.
“Policies that give life coverage, savings, accidental death and dismemberment are good ones to consider,” says Dwight Williams, a financial advisor at Sagicor Insurance.
Term policies are therefore worth considering for the buyer, as these forms are also the cheapest to obtain.
“Term policies can be converted as your economic standing grows,” says O’Brain, adding that life, one-year and five-year renewable term policies, while not carrying an investment component, offer rider options to cover accidents and death.
Williams also cautions against waiting too long to buy a policy as “the younger you are, the smaller the premiums”.
But why buy an insurance policy in the first place?
Unlike other financial products, the benefits of an insurance policy are immediate, effective upon completion of the processing arrangement.
“It provides an immediate sizable estate while you pay small portions,” says O’Brian.
Another advantage of an insurance policy is that, should you die in a state of indebtedness, no claim can be laid against your policy to recover funds to fulfil obligations you may have left behind. In a simalar situation, other assets may be seized.
Your insurance policies may be used to clear debts if you had assigned them to the lender with whom you dealt. For instance, if you borrowed $5 million and repaid $2 million of that amount to the lender, once your insurance policy is valued above the remaining portion, the difference can be taken from the policy and the remainder paid over to your estate.
Insurance policies can also stand as collateral for the acquisition of other financial products such as mortgages and loans.
The peace of mind that an insurance policy guarantees is touted as its finest quality, as one can rest assured that provisions have been made for those left behind.
Industry insiders refute what they say is a misperception that benefits cannot be derived from insurance while a policyholder is still alive.
“Critical illness policies pay out your benefits upon diagnosis of the conditions for which you are covered,” Williams notes.
According to O’Brian, as with any other financial product, if the premiums are not paid, one should not expect to get the benefits.