10 things to know before signing a life insurance policy

Opinions on Thursday, October 8, 2020

Columnist: Justice Peprah Agyei

2020-10-08

Life insurance covers your life and also has provisions to provide an avenue for savings and investment. Life insurance is a long-term contract and requires you to pay your premiums in monthly installments. Life insurance can be purchased for any value depending on the premium that the policy holder is willing to pay.

Life presents us with two main risks. The risk of dying earlier and the risk of living beyond the expected age. When you die earlier, you can leave behind a responsibility like taking care of your children and your education or taking care of your family as a whole when you are the breadwinner. Again, when you live longer than expected, you risk having to take good care of yourself after the pension for the number of years that God will bless you with.

These are the main reasons why the life insurance policy is very important to us. Life policies are designed primarily to provide a solution to these two main risks. Insurance does not prevent the loss from occurring, but it does reduce its financial impact. That is why it is very important to know and understand the following before signing a life insurance policy.

Policy type

The first thing to know is the type of policy. Life policies are based on the design of two main features. There could be a pure risk only policy or an investment only policy or a combination of the two. With a pure risk policy, the only time you benefit is when the insurance event occurs. eg Death, total permanent disability. The pure investment policy generally includes a “cash value” account, which builds value over time. eg Investment.

Waiting period

A waiting period refers to the time an insured must wait before part or all of their coverage takes effect. Only when the waiting period has elapsed, the insured may have the right to file a claim for the benefits of the insurance policy. However, if the insured or the insured person dies as a result of an accident, the full death benefit is paid immediately. Kindly know this from your insurers.

Refresh

Every life policy has a cooling off. Normally, it takes the client 15 days to read the policy document before signing the receipt for the document. The customer has every right to reject the policy if the terms and conditions are not favorable and the premium must be refunded. The client accepts the policy after signing the receipt of the document.

Delivery / benefit period

Most company policies reached surrender cash value after 24 months. Most pure risk hedges have no surrender value. When you cancel your policy before twenty-four months, you get nothing. This is a benefit payable to the policy holder at the end of a policy after the policy has reached a cash value, but before expiration. Penalties apply in case of early surrender. Your benefit is generally affected by the duration of the policy.

Partial cash collection

Once a policy has acquired a salvage value, partial charges can be made during the life of the policy and cannot normally exceed 50% of the salvage value.

Policy loan

A policy loan is issued by an insurance company and uses the cash value of a person’s life insurance policy as collateral.

Lapse rule,

The responsibility generally rests with the insured to make sure the premiums reach the insurance company. The insurer will inform the insured of the premiums owed under the policy. Insurers may default on their part of the obligation when policyholders fail to fulfill their part of the contract by paying their monthly premium for a consecutive period of three (3) months.

Age limit

Most companies and policies have an entry age that is typically 18 years old. The maximum age of the insured is normally 60 years. There is also a maximum age to cover lives. Please know these from your insurer.

Notification

Some companies give the number of days within which the policyholder or beneficiary can notify them, especially in the event of death. Please check with your insurance company about the notification period.

Claim

Below are some of the documents that the insurer may require to fulfill your claim. The insurer will require a properly completed claim form. Most companies may also require original policy documents that were issued to you at the beginning of the policy. When necessary, the following documents will be required: claimant photo identification, death certificate from covered life insurance or policy holder, police report for accidental death and affidavit

conclusion

Life insurance policies provide many benefits, but if we do not understand what we are buying or do not properly understand the terms and conditions of the policy, we may not get the benefits. That is why it is very important to know the above before signing the best life policy that meets our needs.