Life insurance is essential for anyone that has friends or family depending on them financially. It is seen as a kind of protection that will keep your dependants from financial ruin when you are no longer there to take care of them. If you were to die, your insurance policy will pay out a certain amount to the nominated beneficiaries to replace your monthly income. It is not as simple as it sounds; there are more to take into consideration.

For you to make the best decision when choosing a life insurance policy, it is important that you speak the insurance language: learn the terms and find out what the process is and what happens during it. The owner of a policy is called the insured, the company they have a policy with is called the insurer and the money they need to pay into their policy every month is called a premium. If you were to receive the proceeds of someone’s life policy, you will be called the nominated beneficiary and the amount you will receive from the insurer is called a face amount. The estimated amount of time an insured or policy holder has to live is known as the person’s life expectancy. So, now that you can speak the language, let’s talk.

When taking out a life insurance policy, you need to keep in mind that it is seen as a legal, binding contract with terms and conditions. These terms and conditions are mostly standard industry terms and conditions, but can vary from insurer to insurer and it is important that you know these differences in order to make the right policy choice. Most terms and conditions will state that no-one other than the policy holder can change, add or remove a beneficiary from their policy, for obvious reasons, of course. This is a mostly standard term, but may vary.

Insurance companies will always need to do some kind of evaluation to determine if you are a high-risk customer or not. The most common evaluation is the Heath evaluation: doctors will run various tests on you to determine your health status. The results will be sent back to the insurance company to evaluate. Some insurance companies may want more information on you, so they will also do a lifestyle, family history and health history evaluation.

I recently applied for a life insurance policy but was denied one. This was a shock for me as I am a very fit and healthy person, so I decided to make an appointment with my broker, and I asked him what the problem was. He said that the results they received on my family health history suggest that I am a high-risk customer and therefore was denied my policy. Other reasons to be denied a policy includes bad health or unhealthy lifestyle habits, age and if you have a dangerous career or have extreme hobbies and are put at risk more than the average person.

Upon the insured’s death, the insurance company requires a proof of death certificate before proceeding with payment. If the insured’s death is found to be suspicious in any way, the insurer may choose to investigate the death. If there are no signs of foul play, the insurer will pay the claim to the beneficiaries in approximately 2 weeks. In the event of a suicide, the insurer may not pay the claim, depending on the terms and conditions. Some insurance companies may have a 2 year suicide exclusion period. If the policy holder commits suicide within the 2 year period, they will not pay the claim. However, the insured commits suicide after the 2 year exclusion period, they are obliged to pay the claim, but always look at the terms and conditions first. The insurance company will also not pay a claim if you were only covered for accidental death, but died of a non accidental cause. This is why it is important to know what you sign: read the fine print and ask questions if something does not make sense!

Taking out a life insurance policy can be a daunting decision, but it is essential for anyone that has financial dependants. Imagine finding out that your mother, farther, partner or friend on whom you are dependant on did not leave anything behind to help you carry one. Look after your loved ones even when you are not here: take out a life insurance policy.

For more information about life insurance, go to http://www.hollardlifeinsurance.co.za