At the most basic level, life insurance is a contract where you pay money to an insurance company in return for the company guaranteeing to pay out an agreed amount to your dependents and beneficiaries in the event of your death. However, some types of life insurance also enable you to build savings and may give you the option of borrowing money against the value of the policy.
There are numerous types of life insurance, but the most common are Term Insurance (which covers the policy holder against death for an agreed period) and Whole Life (which provides permanent coverage against death). Whole Life tends to be more expensive than Term, as the coverage is more comprehensive and the policy will have an added cash value.
Most life insurance products have three components.
Before taking out life insurance, you should assess your financial situation and work out how much would be required to meet the need for which you are taking out the policy. This could be the cost of maintaining a certain standard of living for your dependents, covering funeral costs or to pay off a mortgage. Add up the costs, account for inflation, and that is how much coverage you need to buy. It is useful to assess this annually, as changing life circumstances may require you to increase or decrease the coverage.
Don’t forget, insurance companies evaluate each life insurance purchase on a case-by-case basis. In general, younger and healthier individuals will be offered lower premiums, as they are less likely to die soon. For older people, or those with medical issues or other high-risk factors, you can expect to pay higher premiums. Many insurers require a medical test prior to purchase due to the risk they are undertaking by insuring a person.
It is recommended that you sit down with your Chubb Life Financial Agent before making your choice. They can help you decide which product is the right one for your needs and best fits your budget.