Protect Your Income And Your Family – How To Live A More Secure Life
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5 Life Insurance Mistakes to Avoid at All Costs
Many of us buy life insurance policies because we want the peace of mind that comes from knowing our loved ones will be well provided for in the event of our passing.
Some of us are more interested in the additional coverage provided by the better policies, such as critical illness coverage for children. Whatever your reasons for purchasing a life insurance policy, it’s vital to do your homework first. You can make a good start by familiarising yourself with the 5 life insurance mistakes our experts urge people to avoid at all costs.
Don’t Make These Novice Mistakes
If you’re thinking about buying life insurance for the first time, there are several critical errors that we urge you to avoid making. If you can avoid dropping these clangers, you’ll be well on your way to securing the right type of life insurance coverage for your needs:
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Focusing Solely on Cost – While it can be very tempting to pick the cheapest policy when you first start looking at life insurance products, it’s not a course of action we’d recommend. A low-cost policy that doesn’t offer the level of coverage or additional benefits you’re looking for may appear cheap at first glance but it won’t meet your needs so it will be a waste of money. Focus instead on finding policies that offer a combination of generous coverage, attractive terms and competitive premiums.
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Ignoring Additional Features and Coverage – The most important part of a life insurance policy may well be the lump sum that is paid out in the event of the policyholder’s passing but it’s far from the only benefit to consider. The best policies offer valuable additional features such as terminal illness benefit, discounts for healthy lifestyle choices and the option to bundle additional coverage such as income protection insurance or Total and Permanent Disability (TPD) insurance. When evaluating the cost of products from different insurers, don’t forget to ensure you’re comparing like-for-like by making a note of all the additional benefits that each policy offers.
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Procrastinating – It’s important to consider your needs in detail and evaluate the policies you’re offered carefully. However, you shouldn’t use this consideration and evaluation process as an excuse to procrastinate and delay the purchase of suitable life insurance coverage. The longer you’re uncovered, the longer you and your family will be exposed to unnecessary financial risk.
Think of life insurance in the same way you think of seat belts when driving. You wear one because it will protect you in the event of an accident, not because you expect to have an accident. A good life insurance policy is like a family financial seat belt that will lessen the impact of certain events on the family finances.
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Skimming Through the T&C – Most of us are used to skimming through the terms & conditions of online service providers, paying scant attention to the content of what we’re supposed to be reading. Whilst this behaviour may have limited consequences when signing up for a new TV streaming service or digital newspaper subscription, the same cannot be said of life insurance policy documents. You need to pay careful attention when reading the terms and conditions of any insurance policy you’re proposing to buy. Certain exclusions or special conditions may render an otherwise suitable policy useless to all intents and purposes.
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Deciding You Don’t Need It – This is a more serious variation of the procrastination mistake: deciding that you’re never going to obtain life insurance coverage at any point in time. This decision will leave your dependents exposed to serious financial risk in the event of your untimely demise.
By considering all relevant factors, studying the fine print and making a timely purchase, you can avoid the 5 big mistakes that life insurance experts see people making almost every day of their working lives. But that’s not all you need to consider. You should also be wary of making any basic errors after choosing a policy.
Post-Purchase Life Insurance Mistakes to Avoid
You’ve found the perfect policy with competitive premiums so now you’re all set, right? Well, yes and no. If you choose to buy your coverage from a company that includes benefits such as future insurability in their policies’ T&C, you will be assured of adequate life insurance coverage for years to come. If not, you may still have some more work to do. However, even if you have chosen the right insurer, there are still some potential mistakes you could make at this point:
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Not Updating Beneficiary Details – Failure to update beneficiary details when life events force such changes upon you can turn out to be a catastrophic mistake. Unless you want to run the risk of the wrong person receiving your valuable life insurance benefits, be sure to keep your policy’s beneficiary section up to date.
- Allowing Your Coverage to Lapse – If you get behind with your premiums, your policy could lapse, leaving your family exposed to unnecessary financial risk. Worse still, you will be unaware of this exposure if you’ve simply overlooked a payment or two. Make sure you’re never in this position by automating payments or at least making a note of due dates on your calendar.
- Never Investigating the Alternatives – Life insurance shouldn’t necessarily be a once-in-a-lifetime purchase. Spend a little time investigating the alternatives as the renewal date approaches each year. You may find your needs are better served by a new product on the market and there’s no reason to stay with an existing insurer if you can get a better deal with another reputable company.
Don’t forget there are various insurers and life insurance products to choose from so there’s no need to settle for the first policy you’re offered. Take the time to research your options, identify your most important requirements and evaluate the companies you find. If, after doing all this, you’re still not sure what to do, it might be a good idea to consult a personal finance specialist or an insurance expert.
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