How to Choose a Life Insurance Policy: Considerations and Steps

A life insurance policy is an important purchase. Since it can impact your financial security and well-being, as well as those of your loved ones, you should give it thoughtful consideration to choose the right plan and coverage. 

In this article, we’ll explain why you should choose your life insurance carefully. We’ll also share important considerations and steps on how to choose a life insurance policy in the Philippines. 

Why it’s Important to Choose Your Life Insurance Policy Carefully

Aside from optimizing the policy’s value and cost-effectiveness, here are reasons to be discerning when choosing a policy: 

✅ You Can Ensure Adequate Insurance Coverage for Your Needs

When you assess your financial situation carefully, you can determine the right insurance coverage to protect your dependents if anything happens to you. Moreover, you avoid underinsuring or overinsuring yourself. 

✅ You Can Evaluate its Features and Benefits 

Although life insurance policies have one thing in common, which is paying a death benefit to your beneficiaries, not all are created equal. Different policy types have different features. 

Narrow down your options as you review the terms, conditions, and add-ons until you find a plan that best meets your needs and closely aligns with your goals.  

✅ You Can Compare Insurance Providers and Premiums 

Premiums and the insurance provider are important factors as well. When you compare life insurance policies, take a closer look at the fine print. Do more research to find other features or differences that you missed or did not discuss during the sales presentation. 

✅ You Can Adapt Your Coverage to Your Life Changes 

When you're younger, you think you have less need for life insurance. But as you grow older, your life changes, you take on more responsibilities, and your family grows. Your need for life insurance also changes. 

As such, regularly and meticulously review your policy to ensure you have the right coverage. 

Read more: Do You Really Need Life Insurance? Yes—Here's Why

What to Consider When Choosing a Life Insurance Policy

It’s essential to know how to choose your life insurance policy. After all, you need to consider a myriad of needs, circumstances, and choices, such as the following: 

📌 Health and Lifestyle 

Insurers consider your medical history to determine if they can offer you coverage. If you have pre-existing medical conditions, you may be charged more for coverage because of higher risks.

You must disclose any pre-existing medical condition or risky hobby and activity as it affects eligibility and premiums. While it’s tempting to omit these details to get more favorable rates, it’s your obligation to provide accurate information so you can avoid disputes or rejected claims in the future. 

📌 Coverage Amount

Not everyone needs the same insurance coverage. Your obligations, situations, and priorities are unique to you. To determine the right amount of coverage to protect yourself and your dependents, take into account your living expenses, debts, and future financial needs.

📌 Type of Policy 

You must also consider the type of life insurance policy you want based on your needs and budget. Decide if you need more affordable but temporary coverage or whole life insurance protection with higher premiums payable for several years. 

📌 Policy Length

Another thing to consider is the duration of the life insurance policy, or the period the policy is in force. The policy length you choose will affect your insurance premiums. For example, a longer policy term means a higher premium because insurance companies take on more risk by covering you for a longer period.^[1]

📌 Features and Riders

When choosing a life insurance policy, study its features and benefits. Look for policies offering living benefits for health-related expenses and riders for enhanced protection. For example, some provide options to convert term policies into permanent ones or to stop premium payments in case of disability. 

📌 Premiums 

Determine how much you can pay for your insurance premiums.  While some policies charge a fixed premium, others increase over time. 

Consider the factors mentioned above, such as health status, coverage amount, policy length and type, and riders, as they will impact your premium rates. Understanding how they affect your premiums will allow you to budget appropriately and ensure you get the best value.

📌 Insurance Provider 

Look for an insurance company that offers fair and competitive rates without sacrificing service and value. Moreover, choose a financially sound company with a strong rating. 

Experience also matters. Insurance companies that have been around for years have a better understanding of how to serve their customers. 

Read more: Should You Get Life Insurance? Consider These 8 Factors

How to Choose Life Insurance in the Philippines

Now that you know the key considerations, here’s how to get a life insurance policy: 

Step 1: Take a Look At Your Financial Situation

The first step is to assess your financial health to determine the type of life insurance plan and the amount of coverage you need. 

To do this, review your current financial situation and what you have to financially support yourself and your dependents, such as savings, emergency funds, other health and life insurance coverage, and retirement funds. 

Also, consider your current financial responsibilities, such as being the breadwinner, paying your mortgage, or saving up for a big purchase. 

Read more: Why the Right Time to Get Life Insurance is in Your 20s and 30s

Step 2: Determine the Right Amount of Coverage

Buying life insurance helps ensure your dependents have enough resources to pay for their long-term needs, including bills and education expenses. Multiply your yearly salary by 10 if you want the quickest and easiest way to determine your insurance coverage. 

You can also start by computing your income and other workplace benefits. Multiply the number by as many years as you need coverage, adjusting for inflation and deducting pension benefits you expect to receive. If you have kids, add the amount you will need for your children's college needs.

Step 3: Choose the Right Policy Type and Length 

Compare different types of life insurance to determine which better suits your needs and budget. Get term life insurance if you need coverage only while achieving your goals, such as a mortgage or college funds for your kids.

But choose whole life insurance if you want coverage for burial expenses, income replacement, and debts. This will cover you permanently as long as you’re alive.

Step 4: Shop for the Best Rates, Features, and Benefits

Compare premiums by getting life insurance quotes from several insurance companies. You can get them online for free or use comparison websites like Moneymax to compare quotes easily. 

For instance, you can easily compare life insurance plans from FWD that suit different needs and budgets. 

The One for Life provides a death benefit, accidental death benefit, and critical illness benefits if you’re diagnosed with any of the 42 covered major illnesses. 

Meanwhile, Set for Life Investment-Linked Insurance provides a death benefit and other add-on benefits like critical illness, multiple critical illness, and hospital cash benefits. You can also opt for different packages and bundles, such as Set for Life Health Bundle (critical illness + hospital cash benefit), Set for Life Family Hero (protection and investment for OFWs), and Set for Life Babyproof (insurance for babies as young as 15 days old). 

Aside from the death benefit, Set for Health Critical Illness Insurance provides major and minor critical illness benefits if diagnosed with any of the covered illnesses. You also get a Healthy Life Benefit, which is 100% of your total paid premiums, if you never make a major critical illness claim. 

When shopping for policies, carefully review the life insurance policy details. Compare each insurer's type of policy, coverage amount, and death benefit. Consider their costs and features to get the best deal.

Related: Life Insurance Benefits: Living and Death Benefits Explained

Step 5: Check the Insurance Provider’s Financial Strength

Consider your potential providers' financial strength to ensure you choose a stable insurance company. The Insurance Commission’s website^[2] lists the top-performing insurance companies in the Philippines. 

It also helps to examine customer complaints to get an idea about customer satisfaction, including both good and bad experiences when dealing with a particular insurance company. 

Step 6: Apply for Life Insurance 

After choosing an insurance company and deciding on the type of insurance policy best suited for your needs, you can apply through a licensed agent or online. 

You may be required to undergo a medical exam, depending on the policy you’re getting. After you purchase your policy, you’ll have a "free look" period^[3] to review it in detail and ensure it meets your requirements and expectations. If it doesn’t, you can cancel the policy without incurring any penalties. 

Further reading: Moneymax and FWD Life Insurance Empower Filipinos to Make Better Financial Decisions

Final Thoughts

How to choose life insurance? It requires careful consideration of several factors, from your specific needs to the insurance company’s financial strength. Thus, the choice of the right insurance is a very personal one. 

By knowing the essential considerations, you can get comprehensive coverage tailored to your unique circumstances. 

Source: 

• ^[1] How Long Should Term Life Insurance Last? A Comprehensive Guide (MarketWatch, 2024)
• ^[2] New Business Annual Premium Equivalent (NBAPE) of Life Insurance Companies as of December 31, 2023 (Insurance Commission, 2023)
• ^[3] IC Orders Insurers to Provide Free-Look period for Health Insurance Policies (Insurance Commission, 2019)

DISCLAIMER: This article was created in partnership with FWD Philippines. While we are financially compensated for this collaboration, we ensure to maintain our editorial integrity to provide you with the best recommendations that can help you make smarter financial decisions.