How to Buy Your Insurance Policy, While getting an insurance policy is a no-brainer, you probably don’t know what to look out for when you are buying an insurance policy. There are so many products in the market that it can be very intimidating.
I am breaking it down for you. Before I begin, there are some key terms which you must understand before you can make this financial commitment to an insurance policy:
This is probably one of the most important terms for you. Simply put, it’s the price. It is usually a monthly cost. The premium is determined by the insurer based on your risk profile, which may include creditworthiness.
For example, if you’re getting health insurance and you smoke, chances are that you’ll be paying more in premiums than someone who does not smoke. Also, different insurers perceive health risks differently. So, finding the best insurer might take some research and comparison. If you’re too busy to do this research, the best decision is usually to work with a financial advisor.
The policy limit (or sum insured) is the maximum amount the insurance company will pay if the loss you’re covered for actually occurs. As mentioned in Investopedia, “maximums may be set per period (e.g., annual or policy term), per loss or injury, or over the life of the policy, also known as the lifetime maximum. Typically, higher limits carry higher premiums. For a general life insurance policy, the maximum amount the insurer will pay is referred to as the face value, which is the amount paid to a beneficiary upon the death of the insured”.
A deductible is a specific amount that you must pay out-of-pocket before the insurer pays a claim. A higher deductible means a reduced cost in your insurance premium.
For example, say your policy has a line of $5,000 in coverage. A low deductible of $500 means your insurance company is covering you for $4,500. A higher deductible of $1,000 means your company would then be covering you for only $4,000.
This can seem like a lot of legwork but, you can always work with a financial security advisor who can do all of this shopping around for you. Typically, they don’t charge for doing this for you. They make a commission off of your policy.
So, the next thing to watch out for is ‘underwriting leniency.’ No matter which insurance company you buy your insurance policy from, they all have their underwriters who are the ones who actually pay your claims. You want an underwriter who has been in the market for decades and has a good claim fulfilment rate.
You could be making a huge financial mistake if you buy a policy from a company that does not treat your particular health or personal activities fairly. Companies range widely on how they price out risks like diabetes, smoking, travel outside North America, or your family’s medical history.
It is advised to speak to a knowledgeable independent agent like myself who can ‘shop’ various companies to find the best rates for your particular situation. If you don’t, you risk overpaying for a life insurance policy – or not being accepted altogether.
A life insurance policy does not just have to pay you after you die. It can very well be an instrument of investment. For example, many newer policies give you the option to receive payments if you get a chronic illness or need to be placed in a care facility. Several companies also give you 20- or 25-year windows at which you can get back some or all of your premium paid into the policy if you no longer want or need the coverage.
If you want the option to get cash out of your life insurance policy if you get cancer or need end-of-life care, then looking for a company that offers this option is a smart move.
There is a lot more that goes into buying the perfect insurance policy for you. However, these are some of the basic pointers to keep in mind. If you need any support, you can book a free consultation with me. I can do the research and shop around for you to buy the perfect insurance plan which will not only ensure that your future is secure but also your family’s. After all, this is what I do at einsured.ca: ensuring you’re insured.
— Aman Ahuja
Financial Security Advisor
Life | Critical | Super visa
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