Before you go for a life insurance policy, make sure you know all about the basics of life insurance. There are usually three parties involved in taking out a life insurance policy. One is the insurance company that provides the coverage. Second is the person who buys the policy and gets insured. The third is the beneficiary, the person who shall gain the amount insured when the person insured dies.
A term life insurance operates for a fixed term, that is, it covers the life of the insured for a fixed term or time period. This essentially means that if the person insured dies during the time when the life insurance is operational, then the beneficiary gets the money. Other wise there is no money either for the person insured or the beneficiary. This is the simplest form of life insurance and the least expensive. It is very basic and covers all the needs of the beneficiary.
Before the policy is sold to a customer, the insurance company usually demands for a thorough health examination. This is done so that people who know their demise is imminent do not take out a policy deliberately and the insurance company is saved from making a sure-shot payment.
People who are extremely busy and cannot take time out for a health check up, there is the option of life insurance no exam policy. The premiums paid in these policies are understandably high because the insurance company is put to a greater risk of making the payment. The policy buying does involve the asking of certain health related inquiries. For example, the question may ask about your smoking habit. Try to answer these queries truthfully. If a lie is caught out, no payment shall be made to your beneficiary.
Hence, life insurance no exam policies are meant for people in reasonably good health. Do not forget that it is involving an increase in the term life insurance cost anyways. Your unwillingness to take a medical test shall translate into higher premiums. Since the premiums have to paid over a number of years, the increase in premium would add up to a large sum being paid to the insurance company as an extra.
You will want to know how much you should insure yourself for. This depends on various factors such as the number of dependents you have, the type of funeral you want, whether your spouse is earning, whether you want to put your children through college, and whether you have any debts. There are online calculators that will ask you all these questions and more and then come up with the figure you need to insure yourself for.
The policy holder can pay the premium in two modes. One is the equated or fixed premium wherein the same amount is paid each year while the other is the increasing premium wherein the amount to be paid increases with age. The former is more popular because it is more inexpensive in the long run while the latter option is good for people who have low income at present.
You also need to decide if your beneficiary should receive the money due to them in one go or as an annuity. This depends on the financial ability of your beneficiary. If they are capable of investing well choose the lump sum option otherwise choose the annuity option. In any case do consult your beneficiary before you decide. This does not apply if the beneficiaries are young children. In that case opt for the annuity option.
Term life insurance is only for a given period of time in accordance with its name. It works on the principle that there would be no need of insurance after a certain number of years, within which the customer would have taken care of his main responsibilities and collected a suitably large retirement fund.
Make sure you pay your premiums on time as otherwise they insurance will lapse. Though you can renew your insurance by paying a small fine or penalty, the point of the insurance is lost if your life is not covered even for a single day. Please do ensure that this does not happen. Also choose an insurance provider which will last longer than you. Do not be lured by fly by the night operators. Please keep all these points in mind when you take out a life insurance for yourself.
