How to analyze your own needs and choose a good life insurance?

On my blog, you will find many articles about various life and health insurance policies and how they work. This time, I decided to write an article from a slightly different perspective—how to approach choosing insurance in the first place? Small or large premium? Individual or group insurance? What coverage should you choose?

When it comes to life and health insurance, it's not as simple as, for example, choosing car insurance (OC). After reading this article, I want you to be able to conduct your own needs analysis, prepare for a conversation with an advisor, and understand what you really need.

Do I need to analyze my needs if I have an insurance advisor?

Analyzing your needs before meeting with an insurance advisor is crucial. While the advisor has specialized knowledge and experience, you know your life, financial, and health situation best. Conducting your own analysis will help you better understand what you truly need and in what scope.

First and foremost, it’s important to determine your priorities. Are you concerned about securing your family in case of your death? Do you want to ensure funds to pay off a mortgage? Or are you worried about the costs of treatment in case of a serious illness? Identifying these needs will help the insurance advisor select the best insurance product for you.

Secondly, consider your financial situation. What are your fixed expenses? How much can you afford to spend on insurance premiums? Being aware of your financial capabilities and limitations will help you choose a policy that is realistically affordable for you.

The next step is to assess the risks. It’s worth thinking about which risks are most likely for you and what the consequences could be. Risk analysis should include not only health factors but also professional and lifestyle-related risks.

In summary, a well-prepared analysis of your needs will make it easier to have a conversation with an insurance advisor and help you choose the right life insurance. This way, you’ll not only save time but also gain confidence that the policy will meet all your expectations and needs.

How to approach choosing life insurance?

Choosing the right life insurance is a process that requires careful thought and analysis. Here are some steps to take to make an informed choice:

1. Understand your needs: The first step is to thoroughly understand why you need life insurance. Determine your financial obligations (e.g., mortgage, children's education), your financial goals, and whom you want to protect in the event of your death. This will help determine the amount of insurance coverage you need.
2. Types of life insurance: There are several types of life insurance, each with its specific features and benefits. The most popular ones are:
   • Term life insurance: Provides coverage for a specific period (e.g., 10, 20, 30 years). It is usually cheaper and often chosen to secure mortgages or other financial obligations.
   • Whole life insurance: Offers lifetime coverage and also accumulates cash value, which can be used, for example, as collateral for a loan.
   • Life insurance with an investment option: Combines insurance coverage with the possibility of investing part of the premium. This product has become less common due to its complexity and regulatory recommendations.
3. Compare offers: Use online tools to compare offers from different insurance companies. Pay attention not only to the premium amount but also to the policy terms, coverage amount, exclusions, and additional options such as insurance for critical illnesses or disability.
4. Check the insurer’s credibility: Before making a decision, it’s worth checking the reputation of the insurance company. Read reviews from other customers, check insurance company rankings, and pay attention to the financial stability of the insurer.
5. Consult with an advisor: Although independent analysis is important, it’s also worth consulting with a professional insurance advisor. The advisor can help tailor the policy to your individual needs and clarify any uncertainties.
6. Read the contract: Before signing, carefully read all the terms of the contract. Make sure you understand all the clauses, exclusions, and obligations. If you have any doubts, don’t hesitate to ask questions.
7. Regular reviews: Your needs and life situation may change, so it’s important to regularly review and update your insurance policy.

What can I insure? A review of various life and health risks

Life and health insurance policies offer a wide range of coverage, addressing various risks related to our lives and health. Here’s an overview of the most popular types of insurance and the risks they may cover:

1. Life insurance:
   • Death of the insured: The primary risk covered by most life insurance policies, providing a payout to designated beneficiaries.
   • Term life insurance: Coverage for a specified period, often used to secure loans or other financial obligations.
   • Whole life insurance: Lifetime coverage for the insured, often with an option to accumulate cash value.
2. Health insurance:
   • Medical expenses: Covers the cost of doctor visits, diagnostic tests, hospital stays, and surgeries.
   • Specialist treatment: Covers the cost of specialist treatment, including physical therapy, rehabilitation, and alternative therapies.
   • Medications and medical equipment: Covers the cost of prescription medications and necessary medical equipment.
3. Critical illness insurance:
   • Critical illnesses: Provides a payout in case of a diagnosis of serious illnesses such as cancer, heart attack, stroke, kidney failure, or organ transplants.
   • Additional treatment costs: Covers additional costs associated with the treatment of serious illnesses, such as rehabilitation, specialist therapies, or nursing care.
4. Accident insurance:
   • Accidents and injuries: Covers the cost of treatment for injuries sustained in accidents, such as fractures, sprains, or head injuries.
   • Disability: Provides a payout in case of permanent disability caused by an accident.
   • Accidental death: Provides additional benefits in case of death resulting from an accident.
5. Disability insurance:
   • Temporary disability: Benefits paid in case of temporary inability to work due to illness or accident.
   • Permanent disability: Provides benefits in case of permanent disability, which may include both a lump sum and regular monthly payments.
6. Hospital insurance:
   • Hospital stay: Daily benefits for each day spent in the hospital due to illness or accident.
   • Surgeries and procedures: Additional benefits for surgeries and medical procedures performed.
7. Child insurance:
   • Injuries and illnesses of children: Coverage that includes the cost of treatment for injuries and illnesses in children, often with additional benefits for education in the event of serious illness or the death of a parent.

In summary, the wide variety of insurance options allows for coverage to be tailored to individual needs and risks. It’s worth thoroughly analyzing the available options and consulting with an advisor to choose the most appropriate policies that provide comprehensive protection for life and health.

Should the premium be the deciding factor?

The insurance premium is one of the key factors to consider when choosing a policy, but it shouldn’t be the only deciding element. The premium often reflects the scope of coverage offered by the policy. Cheaper policies may offer less coverage, which may mean they won’t cover all the necessary risks. It’s important to carefully check what a given policy covers and whether it offers sufficient protection for your specific needs.

Some policies may have numerous exclusions and limitations that could affect the ability to receive benefits in certain situations. A cheaper policy may have more exclusions, limiting its usefulness. Before making a decision, it’s important to carefully read the terms of the contract and understand its limitations.

The price of the premium may also reflect the financial stability of the insurer. It’s important to choose an insurance company with a good reputation and financial stability to ensure it will be able to pay out benefits when needed. Reviews from other customers can provide valuable information about the quality of customer service and the claims process. It’s worth paying attention to these reviews, even if the policy seems attractively priced.

Every person has unique insurance needs that may vary depending on life, health, and financial circumstances. It’s important that the policy is tailored to your specific needs, even if it means higher premium costs. Some policies may offer additional benefits, such as critical illness coverage, investment options, or the ability to extend coverage. These additional options can increase the value of the policy and provide more comprehensive protection.

Am I insuring myself for me or for my loved ones? Considering different perspectives

The decision to purchase life insurance often raises the question of whether we are doing it for ourselves or our loved ones. The answer to this question can be more complex than it seems, as life insurance can serve both our interests and theirs. Here are different perspectives to consider:

On one hand, life insurance is primarily a form of financial protection for our loved ones. In the event of our death, the policy provides funds that can help cover living expenses, pay off loans, or finance children’s education. This approach assumes that we are insuring ourselves mainly to protect the financial security of our family, especially if we are the main breadwinner.

On the other hand, life insurance can also benefit the insured person. Some policies offer savings options for the future, allowing for the accumulation of cash value that can be used for various purposes, such as retirement security or financing major future expenses. Additionally, some health or critical illness insurance policies can provide funds for treatment and rehabilitation, directly impacting the quality of life for the insured.

It’s also worth considering the emotional aspects of life insurance. Knowing that our loved ones will be financially secure in the event of our death can bring us peace of mind. This, in turn, affects our daily lives, reducing stress and anxiety about the future.

The perspective of loved ones is crucial if we think about the responsibility for their well-being. Life insurance can provide financial support in difficult times, protecting them from sudden financial changes and allowing them to continue their current lifestyle. This is especially important for parents of young children, those with financially dependent partners, or family members with disabilities.

Common mistakes and myths when choosing life insurance

Choosing life insurance is an important decision that requires careful analysis and understanding. Unfortunately, many people make mistakes or are guided by myths that can lead to an inappropriate choice of policy. Here are some of the most common mistakes and myths that are worth knowing:

1. Underestimating insurance needs: One of the most common mistakes is underestimating the amount of insurance. Many people choose the minimum coverage amount, which may not cover all financial obligations in the event of their death. It’s important to thoroughly analyze your needs, taking into account family living expenses, loan repayments, children’s education, and other financial obligations. When an event occurs, it’s too late; it’s better to fully consider critical events now rather than skimp on yourself or loved ones and later regret it.
2. Focusing only on the premium price: While the cost of the premium is an important factor, it shouldn’t be the only criterion for choosing a policy. Cheaper policies may offer limited coverage or have numerous exclusions that could make the policy less useful in critical situations. It’s important to pay attention to the scope of coverage and the contract terms. The saying "there’s no such thing as a free lunch" applies here. It’s essential to remember that insurance companies use the same life expectancy or morbidity tables, so if it’s cheaper, something is missing. Often, this will be hidden in definitions that can easily escape the notice of inexperienced clients or even agents.
3. Not reading the contract terms: Many people don’t thoroughly read the contract terms before signing the policy. This can lead to unpleasant surprises in the future when it turns out that certain situations are not covered. Always carefully review the contract terms and understand all exclusions and limitations. Unfortunately, in such cases, we can only blame ourselves; the best agent cannot replace our attentiveness.
4. Procrastinating the decision: Many people postpone the decision to purchase life insurance, thinking there will always be time to do it later. Unfortunately, no one can predict the future, and delaying this decision could mean that when insurance is truly needed, it may be too late. It’s important to secure yourself and your loved ones as soon as possible.
5. Believing young people don’t need insurance: There’s a belief that young people, especially those without children, don’t need life insurance. In reality, younger people can benefit from lower insurance premiums and secure coverage for the future. Additionally, some policies can accumulate cash value, which may be useful later in life. As an agent, I’ve come to realize this too many times, especially after the pandemic; we primarily buy insurance with our health, and that can change from one day to the next.
6. Believing all policies are the same: Every insurance policy is different and offers various benefits. It’s important to compare different options, paying attention to the scope of coverage, contract terms, exclusions, and additional options such as critical illness coverage or investment opportunities. After years of working, I now lean towards working with only selected insurers, getting to know their definitions, coverage, and especially the payout of benefits inside and out.
7. Not updating the policy: Life and financial situations can change, so it’s important to regularly review and update your insurance policy. A policy that was appropriate a few years ago may no longer meet your current needs. As part of my collaboration with clients, I regularly reach out for updates and policy reviews.

Feel free to contact me and discuss life insurance. I’ll help you choose the most suitable one!‍