Compare Life Insurance

Close up of Life Insurance Policy with pen, calculator

Life insurance is a once in a life-time decision, and you do not want to rush into making a hasty and wrong choice. Sure, you can change insurance policies, and get more than one policy, but why make mistakes, and why do things by half-measures when you can get a perfectly fine policy in your first try? This article should give you a good starting point in your decision to compare two or more life insurance policies.

Apart from the primary factor of monthly premiums for the same amount of insurance, there are two important factors that decide the type of insurance you should take. One is whether you want to take term insurance or whether you want whole life insurance. The second factor is the insurer – especially factors such as the insurer’s financial soundness and the quality of service offered by the insurer. We touch upon these two here prominently.

Term or Whole Life Insurance

Whether you want to go with term life or whole life is the biggest factor when you compare policies. Term life refers to policies in which all that you are purchasing is the insurance product – where as in whole life policies, the insurance product comes bundled with a investment plan. The premiums you pay for whole life insurance plans pay not just for insurance cover, but also go into an investment portfolio of equity or debt as is the mandate of that plan.

With your premiums paying regularly into the investment portfolio, the whole life plan will slowly build up a cash value over time; and at the end of the policy, you will get a payout. This payout is sold by many insurance salespeople as a attractive proposition for whole life plans – but they neglect to mention that it is your premiums that result in the payout. If only you were to invest in a regular systematic investment plan, it is likely you will get a higher payout. In other words, insurance as a investment product is not something you want to go with; but ultimately the decision is yours.

The Insurer’s Rating

Most insurers are rated by third party credit rating companies. These ratings will give you a hint about the financial soundness of your insurer – which in turn is important because you want your insurer to stick around for the life of your insurance policy, which may be 10-30 or more years. You should go with companies that are rated “A” or above. The credit rating of a insurer is easy to obtain, and can be found free on the internet or from the insurer itself.

Other factors that go into comparing life insurance products are the different types of covers they offer, and these differ from product to product. Make sure you get a policy that gives you the cover you seek — for this we advise you to read the offer document carefully, and not just go by the word of your financial advisor.

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