Before considering a life insurance purchase, examine a few life insurance comparison websites for your best pick. The first thing to consider is specifically what you – the purchaser – would like the insurance to do. For instance if an insured would like the insurance to pay off their home loan, but not provide any other protections they could use the value of the home loan to determine how much insurance coverage to purchase.

Some policies may even reduce the amount of coverage annually to keep pace with the remaining amount on the home loan. An individual looking to provide monthly income to a surviving spouse or child might choose a policy that offers ongoing payments instead of a lump sum payout. Once it is determined what protection the insurance needs to provide it is easier to determine the appropriate type of insurance and features.

There are two basic types of life insurance. Term life insurance provides coverage for a specific period of time, where as permanent insurance is based on covering an individual for their lifetime at a set price. Permanent insurance often contains an investment component that helps the insurance company offset economic changes during an individual’s lifetime. Often the company may allow individuals to borrow from this money provided they repay it with interest and accept a reduced death benefit for any outstanding loans in the event that they pass away.

Another consideration is the financial strength of the insurer. There are independent publications that examine the assets of an insurance company and issue ratings based on how much capital the insurer has set aside to pay claims. Standard & Poors, and Moody’s, are two such publications that rate Australian Insurance companies.

Before purchasing a policy it is also important to discuss the policy with a professional accountant. Depending on whether a policy offers investment options and the details of these options, the proceeds might be treated differently for the beneficiary. The tax obligations of the insured and the value of their estate might change how proceeds are treated as well. These specifics could determine whether the investment options in the policy make sense for the purchaser.

There are also several additional features a policy may offer called ‘riders’. These can offer additional coverage or coverage changes in certain situations. Some of these may be included and others may cost an additional fee. A few common riders are as follows.

A terminal death benefit rider may offer the option to accept part or all of the proceeds of a policy in the event that death is determined to be imminent, so as to pay for expensive medical bills or other needs. A suicide rider may cover the insured even in the event of suicide after a specified period of time. A spousal rider can add coverage for a spouse. A guaranteed renewable rider may guarantee the ability to renew the policy without proving medical eligibility.

Finally, when purchasing insurance the whole application should be read in full. Often the application itself becomes part of the issued policy that is a binding contract. The application should also include the life insurance premium cost and the cost of any riders. Nothing not mentioned in the application should be assumed to be true.