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Lifepedia - Savings and Investment - Recalibrate premiums

Are low premiums the only sexy thing in life insurance?

Minimalism - A great way to live; but not necessarily applicable to all aspects of life

10 Sep 2022
Are low premiums the only sexy thing in life insurance?

 

Most of us know we need life insurance - so we get tempted to do the minimal. We browse around for the cheapest possible premiums, and then congratulate ourselves for “getting it cheap”.

But when you treat low premiums as the only sexy and appealing part of a policy, you miss out on the real good stuff. Here’s what you may be missing:

The really good parts of a great life insurance policy:

●      Securing the best deal with your youth

●      Sufficient coverage

●      Future bonuses or cash dividends

●      Flexibility as your life needs change

 

1. Securing the best deal with your youth

Life insurance pays out if you pass on, or suffer Total Permanent Disability (TPD); and we all want the best for our loved ones. But can you be so well-insured, your beneficiaries can count on a million-dollar payout?

The good news is, this may be possible if you start young. When you’re younger, you’re generally seen as being in better shape - you probably haven’t developed any serious health conditions yet, like high blood pressure, diabetes, etc. (please try to keep it that way!)

Because you’re at less risk, this means you may be able to purchase higher coverage and payouts (see point 2), for premiums that are still affordable. One of the best parts of whole life insurance is that, if you start in your 20’s, it can be possible to secure million-dollar benefits even if you’re not super-rich.

 

2. Sufficient coverage

The key to a great whole life policy is both affordable premiums, plus sufficient coverage.

Sufficient coverage means that the payouts from your policy can meet the needs of your loved ones. This can vary between individuals. For example: if your children are already in their 20’s and working, then you may be able to get by with lower coverage - they can probably look after themselves by now.

But what happens if your children are still just six or seven years old? You can opt to raise your coverage, to provide for them until they are 18 or 21. Likewise, you can raise your coverage to ensure you can provide for other dependents, such as if your spouse is not working, or if you also have elderly parents to look after.

In addition to coverage for death and disability, you may have the option to add riders to your whole life insurance*.

There’s no single “correct” figure, when it comes to how much coverage we each need - it differs based on who we’re providing for, and our financial situation. Talk to a qualified financial representative to work out the correct coverage for you.

*The availability of different riders will vary between policies.

3. Future bonuses or cash dividends

Some whole life insurance plans have a non-guaranteed participation bonus. This means part of your premiums are invested in a fund that's managed by a financial professional. Depending on how well the fund performs, you may receive a bonus to your policy’s cash value (this usually consists of a guaranteed bonus, plus a variable, non-guaranteed bonus).

Or if that’s too complicated, you can settle for a policy that sticks to guaranteed benefits only. This way, you’ll know exactly what your beneficiaries are receiving.

4. Flexibility as your life needs change

Say you’ve reached a different stage in life, where your beneficiaries are all successful. Your children have high-paying jobs, or your spouse has established a major business - you no longer need financial protection from your whole life insurance.

In some cases, depending on your policy, you may benefit and obtain the accumulated cash value. This is something you can’t do with simple term insurance, which just terminates after it ends.

(Mind you, this isn’t to say you should surrender your policy on a whim! Please speak to your financial representative to determine when is the right time to consider this).

The sooner you get insured, the less you might pay for higher benefits.

Life insurance
Life insurance

Covers death, total permanent disability, terminal illness

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