What factors should you consider when receiving a life insurance pay-out?
A life insurance pay-out is a payment you receive either from your policy or as a beneficiary of someone else’s policy.
This pay-out can be paid in one lump sum or as a monthly amount for a specified period. The pay-out is dependent on a certain event happening, for example, if you become severely ill and aren’t able to work for a long time, or if someone you financially depend on passes away.
You must provide documentation to get the pay-out.
Once the event has happened and you know you are eligible for a pay-out, you need to get certain documents together and send them to the insurer before you can receive the money. If you are a beneficiary of a policy and someone has passed away, then you would need documents such as copies of the person’s death certificate and their ID, and a copy of your ID. If it’s your own policy and you’re claiming for something like critical illness, then the insurer will most likely require medical information from your doctors. Every insurer is different, however, and you’ll need to understand what they need from you.
Think carefully about how you’re going to spend your payout.
It can be very tempting to want to treat yourself and those close to you as soon as you receive a pay-out, especially when you get a lump sum. A life insurance pay-out is not a windfall but intended to cover important expenses. There are crucial factors you should consider when deciding how to use the money. Do you have some debt that you could pay off? Could you put the money aside for a specific purpose, such as paying a deposit on a house? Would investing the money be an option? What do you think you and your dependents need the money for the most? It is often a delicate balance between catering to your existing financial needs and your future needs.
A financial adviser can help you.
When making money decisions, it is best to turn to professionals. A reputable financial adviser can help you with information about your short-term and long-term options for spending money wisely. For example, they can help you work out how much money you could save on interest payments if you paid off some of your debts now. They could also look at the best options for you to pursue if you wanted to invest some of the money. With some sound financial advice, you can ensure that your payout goes a long way, and the money helps to look after you and your loved ones for a good period of time.
You should always turn to the experts when it comes to insurance.
Insurance products can be pretty complicated. Making the wrong decision can have serious consequences for you and your family, so it’s worthwhile to shop around for the best advice. Fortunately, many well-qualified financial advisers can answer your questions, give clear explanations, and help you understand what you’re buying when it comes to life insurance. Financial advisers must meet strict regulatory requirements and be properly licensed with the Financial Sector Conduct Authority (FSCA) and product providers. You have the right to ask your adviser for their credentials and ask whether they are independent or work for a specific product provider.
Test your knowledge
- A life insurance pay-out can be received:
A: Monthly
B: As one lump sum
C: Either
- What is the first thing you should do when receiving a life insurance pay-out?
A: Take the family on a luxury holiday
B: Put the money into your bank account and don’t touch it
C: Seek the advice of a reputable financial adviser
Answers
- C
- C
This consumer education article was made just for you by BrightRock.
BrightRock Life Ltd is a licensed financial services provider and insurer. Company registration no: 1996/014618/06, FSP 11643. Terms and conditions apply.
