Investing in a financial product can benefit you or cost you dearly. In the end, we all want our money to work for us instead of the other way around.
Knowing what features to look for when investing in a product such as life insurance or other investment portfolios that are designed to protect your financial future is what can help you navigate your way around finding the right fit. Here is a financial checklist to get you started.
Before we get started
The Financial Advisory and Intermediary Services (FAIS) has implemented regulations to ensure that you are protected. What this means is that any financial institution that provides a service or product must undertake a financial needs analysis to assess if the product will be suitable for you and your financial goals.
It is illegal for financial institutions to give you a product or service that they know could complicate your financial situation in the future. However, the onus is also on you to carefully read through the financial product information to see if you will be able to afford it in the long run. So, what else do you need to check before putting your name on the dotted line?
Understand what you are investing in
The devil is in the detail. Always ask yourself if you fully understand what you are getting yourself into. Carefully read the terms and conditions to see if there are any penalties, additional fees, and interest rates that come with the product. Unfortunately, the finance industry is warped with jargon that leaves many consumers confused or overwhelmed. If there is something that you are unclear about, ask for clarification. It’s better to have a full understanding than to be caught in a place where it is too late to back out.
Compare your options
Investing in something like life insurance is a long-term investment, which you expect will protect you and your loved ones when you need it the most. Therefore, settling for the first offer that seems good is not always a good idea. Compare your options and the policy features along with the premiums to see if you will be able to afford it.
Assess the return on your investment
All might appear good and well on paper but crunch the numbers to see if you will be getting a good return on your investment. For example, when taking out a life insurance policy check if it will be taxed, which can reduce the amount you or your loved ones receive. Check if the product has a competitive rate to offset inflation which means that it will maintain its value when the payout is paid.
Ongoing costs
Always check if you will be able to afford the ongoing costs. The initial fee may be low, but overtime these could be increased by percentages that can affect your premium. There could be age related premium increases or annual increases that can affect the overall amount that you pay. Check if you will be able to afford this overtime to avoid having it as a financial burden.
Constantly review your portfolios
Keep in mind that your life is constantly changing. Therefore, you will need a product that can keep up with such changes without coming with a hefty price tag. This is why it’s crucial to periodically assess if a financial product is still in line with your goals instead of pouring your money into something that no longer benefits you.
What does it not cover
While all the bells and whistles are enough to get anyone excited, always read the fine print to check what a financial product will not cover. These are also known as exclusions. It is a guideline on what can cause your investment to be cancelled, denied or made null and void.
