Insurance is a legal contract. Many of the terms may be new to you. Don’t be shy about asking questions. It is a good idea to have your adviser go through the policy with you point by point.
Six questions to ask before you buy insurance:
- How does this policy meet my needs? Find out what it covers and what it leaves out. Make sure it meets your financial needs and goals.
- What does it cost? Find out how much you’ll pay for the premiums, and how often you’ll pay them. Are you getting the best rate the insurance company offers? If not, ask why. For example, you may not get the best rate if you have a health problem.
- Will my costs change? Some premiums don’t change, but others change each year or every few years. Your premiums may also change if your health changes.
- Can I really afford the premiums? With life insurance, you have to be able to cover the cost over many years. Will you be able to keep up the payments? Would you be happier with less coverage and a lower premium?
- How long does this policy last? Some insurance, like your car and house insurance, renews each year. Life insurance is different. If you plan to buy a term life insurance policy, find out if you will have to pass a medical exam to renew. Also, find out if you can change from a term to a permanent life insurance policy later, if you want to.
- Does this policy let me build savings? If you are buying this type of policy, the adviser will likely show you examples of how your money could grow over time. Be sure to ask how they worked out their examples. Ask to see what the charts would look like if interest rates go up or down. Also ask to see how it would look if your investments don’t work out as well as you had hoped.
Remember: It’s important to ask questions before you buy insurance.
You need to be sure your adviser is recommending the best type of policy for you.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.