Some useful tips
- Factors that affect your premiums include age, pre-existing medical conditions, coverage relative to existing income, nature of job, and number of dependents. Naturally, if your term life policy expires and you decide to renew it, you should expect your premiums to be higher.
- Check if your term life policy has a conversion feature or guaranteed renewals. Perhaps at the end of a 20-year term life policy, you may realise that you are suffering from an illness. If the policy has a conversion feature, you can convert to a whole life policy. If not, you will have to exit the policy and attempt to re-enter, but you may be rejected and no longer be covered.
- Be sure to check the fine print on how much you will get if you surrender the policy prematurely. Sometimes, you could lose the returns from the savings that you have put in all those years before.
- With whole life policies, avoid unit-linked policies. This is an investment feature that ties your cash payout directly to the performance of the underlying investment. In other words, you bear the full risk of your investments that are managed by the insurance company. In such cases, you are better off investing in a particular fund directly rather than through your insurance company.
- For whole life policies, there are participating and non-participating policies. With non-participating policies, your investment returns are fixed and the insurance company bears the risk of the underlying investment. As you can expect, the insurance company will offer you a lower return for this, but it will be less risky for you.
- If you plan on getting a housing loan, make sure that the life insurance coverage does not overlap with any mortgage insurance you get. If you feel that your life insurance provides enough cover in the event you are unable to pay your loan repayments due to death or permanent disability, you can speak to your bank to waive the requirement for a mortgage insurance policy.