Review your current life insurance - Policyholders are recommended to evaluate their life insurance policies to see if they should make any changes. If you have insurance, maintain it because it might be harder to get due to the coronavirus pandemic. Many insurers are asking whether an applicant tested positive or was exposed to someone with COVID-19 within 30 days. If so, your application may be postponed, especially if pre-existing conditions put you at greater risk for COVID-19. Some insurers conditional coverage while an application is in the underwriting stage. Other insurance carriers may offer conditional coverage as well, though some have suspended it due to the pandemic.
Decide if you need more coverage - Most Malaysians who have life insurance are underinsured. Being underinsured is when your death benefit does not cover expenses like mortgage, college, food, debts, and clothing for your dependents in the event of your death.
If you've evaluated your current life insurance and you need more death coverage, you will have to go through the insurance underwriting process, which includes a health questionnaire. However, you must not cancel your current coverage until you know you're approved for the higher death benefit.
Combining term and permanent life insurance - If your goal is increase death coverage, then combine term insurance to complement your existing permanent life insurance. term insurance is the most reasonable cost-wise. Permanent plan offers more flexibility for changes due to life events like birth or marriage. If it's important for you to have coverage that never expires, then permanent life insurance is best as it doesn't expire and has an accumulated cash value that you can take a loan on or use as collateral. Permanent life insurance policies have riders for long-term care insurance along with a death benefit. There are different add-on riders for permanent insurance that are not available for term life insurance policies.
Converting your term life policy to whole life - Term life insurance lasts for a specified period of time —five, 10, 20, or 30 years. Once your term expires, you have to reapply for insurance again. If you bought a 20-year term life policy at 25, when you are 45 years old your policy will end and you will need to get coverage. Even if you are in good health, life insurance becomes more expensive as you age. Converting term life insurance to permanent takes a portion of term insurance or all and changes the coverage to permanent. You do not need to submit to additional medical underwriting because your policy would convert at the health rating under the original term policy. Your health insurability is locked from the time your term life insurance became effective. When you make the conversion from term life to permanent, understand that there are different types of permanent life insurance policies, such as whole, universal, and variable life. It is important to talk to your insurance agent or financial planner about the differences between the various permanent life insurance policies to understand what works best for your situation.
Talk to a financial planner - If 2020 has stressed your finances, start 2021 by talking to a financial planner to see what you can do to rebuild your finances and develop a plan for a more stable financial future. A financial planner is not just for the wealthy. The job of a financial planner is to evaluate your current financial situation and help you develop a plan to achieve your financial goals. Everyone's circumstances varies and that is the benefit of a good planner — meeting you at your level and planning according to your budget and needs.
Life insurance, particularly permanent life insurance, can be a tool to build wealth. Start with your bank to see if it offers financial counseling. Contact your life insurance agent to see if they have financial planning that goes beyond term life insurance.
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