Whether a life insurance policy is the right one for you, i.e. is suitable, is dependent on a number of factors.
The term suitability basically means that a certain product, in this case the life insurance, is appropriate for a certain individual. So a life insurance policy that is right for you may not be suitable life insurance cover for someone else.
When considering taking out a life insurance policy you need to take into account a number of different factors.
The first and most important one is your liabilities. Ideally in the event of your death you would want to have enough life insurance to cover debts such as your mortgage, any loans and credit cards etc. This way you will not be leaving any outstanding monies owed that your next of kin may become liable to have to pay.
Secondly, you may want to take into account any dependents or next of kin that you may be leaving behind in the event of your death. You may wish to ensure that an appropriate lump sum of money, after your liabilities are paid off, is left so that your dependents and or next of kin can live comfortably.
So, the amount of life insurance cover you may wish to take out would be made up of your liabilities and an amount to provide a comfortable income for anyone left behind in the event of your death. The life insurance policy is payable as a tax free lump sum in the event of your death. Also, in most cases the life insurance cover will pay out on the diagnosis of a terminal illness.
If the life insurance was to pay out the benefit due to a terminal illness the diagnosis must be provided by either a general practitioner or practicing consultant. The life expectancy of the insured must be no longer than twelve months. At this stage the life insurance policy would pay out early thus enabling the insured to make the necessary financial arrangements. However, in most cases the life insurance cover would not pay out early, on the diagnosis of a terminal illness, if the term of the policy only had twelve months left before expiring. In some cases, with some insurers, this period is eighteen months prior to the life insurance policy expiring. In these situations the life insurance company would then only pay out the life insurance policy upon death of the insured.
The ideal suitable life insurance policy for you will only be right if you can afford the monthly premiums. The monthly premium is dependent upon the cover amount, the term of the policy, your age, sex, whether you smoke, your lifestyle, health and family health. If you are unable to keep up the monthly payments to the insurance company the life insurance policy will lapse and you will no longer be covered. Therefore, you may not be able to have your ideal suitable life insurance policy. You may have to prioritise and possibly only cover your liabilities if that made the premiums affordable. This policy would then be the right one for you.