How to Manage Your Personal Life Insurance Policy for Maximum Gains

Many of us have encountered a life insurance agent at some point in our day-to-day interactions – and although we didn’t have a life insurance policy as part of our financial plans, it started to weigh us down to make room for him.

Nevertheless, the decision to take out a life insurance policy has remained difficult for many as it is usually not part of our financial plans and is only a reluctant consideration.

Let’s explore a few questions that come into play in our quest to own life insurance policies. These should help us understand the processes of acquiring a life insurance policy and how to properly manage it to enable us to benefit from it when the need arises.

What is a life insurance contract?

Life insurance is a contract between an individual and an insurance company whereby, in exchange for the payment of premiums, the insurance company undertakes to pay a lump sum when a specific event, such as a death, serious illness or disability, occurs. A life insurance policy can also be used for long-term savings needs.

There are mainly three types of individual life insurance policies in Ghana: term policies, whole life policies and endowment policies.

Whole life policies are burial policies with other extended benefits that provide lifelong coverage for the policyholder and other family members.

Term life insurance protects for a selected period. Benefits under this type of policy are payable if the insured event occurs during the selected period.

Endowment policies offer the possibility of long-term savings while providing coverage in the event of death. A capitalization policy pays a benefit whether or not the insured survives the selected term.

How can I choose the right life insurance portfolio for my needs?

With all the life insurance options available in the Ghanaian market, choosing the right policies for adequate coverage can be daunting.

Let’s take the case of Kofi, a 26-year-old young man who is starting his working life. In addition to building an illustrious career, he hopes to marry, have children and run a household. He aims to give his family and all his dependents the very best in life.

He can live a long healthy life and die beyond 70 years. On the other hand, he might leave this life sooner than expected. In any case, certain needs require reflection to decide on the right portfolio of life insurance policies. If he lives a long time, there could be disruptions such as serious illness or disability and the death of other dependents, which could pose a cash flow problem. On the other hand, if he dies younger, he leaves the family with a substantial financial burden.

To start, Kofi can consider a term life insurance policy with a sum assured equivalent to multiples of his annual income (between 5 and 10 times) to cover the most critical period of his life, namely his working years. .

The term life insurance policy will serve as “income replacement” in the event of death, critical illness or disability that could truncate the family’s income.

Second, if he has dependents such as a spouse, parents, in-laws and other extended family members whose death could interfere with his income, he may consider shifting that burden to a insurer by taking out a whole life insurance policy such as a funeral policy on their lives. This policy will assure him of funds for final expenses without interfering with his regular income.

He can then consider an accumulation policy that will meet his medium to long term savings needs (usually a minimum of 5 years) at a premium he can afford. In addition, this policy will give him additional death benefits while assuring him of funds for the education of children and other projects.

A budget for the portfolio of policies he chooses will depend on his level of income. If their income is limited, they may want to start with lower sums insured and select automatic adjustment options that will allow their benefits to increase over time.

As he goes through the different stages of his life, his life insurance needs may change. Therefore, he may need to discuss with his insurers to make the necessary adjustments over time.

When should I start a policy?

Regardless of their age or life circumstances, anyone can benefit from a life insurance contract and must be insured. The best age to buy life insurance is when you start to need it, which is when you start earning an income.

The rule of thumb is to buy young because premiums are cheaper. Older people pay higher premiums because they are considered higher risk. However, the best time to hold a life insurance policy now is if you missed previous opportunities.

What to consider when buying a life insurance policy

Assess your current financial situation.

Know what coverage you need.

Choose your desired font portfolio based on your needs.

Understand what affects your premium: age, gender, medical history and amount of coverage required.

Prepare for the application process by being ready with the necessary information related to your policy. Some policies may require you to pass a medical examination, depending on the sum insured required.

Be honest when asking, as this can happen in the event of a claim.

Be prepared to pay your first premium: Paying your first premium soon after enrolling will give you immediate coverage.

How to manage my life insurance policy for maximum gains?

Ask for a policy schedule to make sure your insurer has captured your information accurately.

Pay your premiums at the scheduled period (monthly, quarterly, annually, etc.) that could have been determined at the start of the policy. You may consider speaking with your insurer if there is a problem with your payments.

Request a statement once a year to make sure your payments and benefits are meeting your goals. You may consider speaking with your insurer to adjust your benefits based on your current situation.

Look for improvements and additions made by your insurer and consider an upgrade.

Be sure to communicate changes such as change of name, death of beneficiaries, marital status and any corrections you deem necessary that were not present at the start of your policy.

What should I know about life insurance claims?

Many have refrained from taking out individual life insurance policies in Ghana due to a perception of difficulty in claiming and delaying claims. However, making a life insurance claim is very easy once you understand the process. I hope these steps will help you make your life easy.

Inform your insurer immediately in the event of a claim

Know the documents required for your claim. Typically, the documents below will help with a life insurance claim:

A proof of death document such as a death certificate or medical certificate of cause of death
A medical report for critical illness and disability claims
A police report for accidental death
Identity card of the deceased and of the applicant
Any other supporting document that you deem relevant to the claim

Be honest in providing information when filing your complaint. The information you provide should primarily match the information you provided at the beginning of the policy. Remember that insurers rely on other third parties to confirm information that may need clarification.

Having an individual life insurance policy is an end, not a means. Some people purchase life insurance policies due to an immigration requirement or other reasons.

Have a life insurance policy because of its benefits to you and your family, and manage it well for maximum benefits.

“Life insurance is like a spare tire; it is better to have it and not need it than to need it and not have it.

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Justin D. O'Neill