Costly Mistakes to Avoid When Buying Life Insurance
Buying life
insurance is a
significant step to protecting your loved ones against unforeseen happenings.
It’s a fundamental aspect of your financial plan, and there are a variety of
factors to consider before buying one. However, there are many misunderstandings
when it comes to purchasing life insurance policies, and this has made many to
make costly mistakes in the process.
Here are slips to beware of when buying insurance
policies:
- Going for the cheapest option
In these tough economic times, many people opt for. Don't use plagiarised sources.Get your custom essay just from $11/page
cheaper things to save some bucks while shopping. As such, many go for less
costly insurance policies, and this is a big mistake. If the insurance firm is
unable to meet the claim in case of an untimely death or takes a more
extended period to do this, this may not be pleasant to the family members.
Don’t always consider the cost of the policy, but rather other metrics like; duration of the settlement for death claims, and claims settlement ratio. Moreover, check out reviews from other customers online and go for an insurance firm with a proven track record for settling claims on time.
- Withdrawing before maturity
Such an act can compromise the financial security of your
loved ones in case of unfortunate incidents. However, most policy buyers
surrender their policies to cater to other pressing financial needs, hoping to
buy another cover once their situation improves. But, this is risky because you
can’t control death. Additionally, life
insurance is more costly when a buyer gets older, and you should plan on
how to meet unexpected financial needs rather than withdrawing during economic
distress.
- Relying on a
sole employer for your insurance policy
Although your employer may cater for your life insurance, this is ideal when you don’t have kids. If you
have many dependants and other financial responsibilities, this may not be
enough. Most employer policies don’t cover more than twice your annual salary.
It’s advisable to have your policy cover up to ten times your yearly salary.
Moreover, if you shift from one employer to another, you won’t move with your
policy.
- Improper
naming of beneficiaries
By naming the right beneficiaries, you ensure that your
money goes to the right people. It also avoids lengthy legal processes to
distribute your property. By so doing, you also save your family a lot of time
and expenses. So, keep your list of beneficiaries up to date and consider
things like estate and tax ramifications when choosing the successors.
- Not
evaluating your situation regularly
All families have varying needs. Things like the number
of dependants, savings, outstanding obligations like mortgages and loans are
some of the factors to consider when buying an insurance cover. With these
estimates, you can accurately settle on the amount of insurance coverage
required. However, your life
insurance needs are bound
to change over time, and you should periodically review your needs and update
any changes warranted.
Final thoughts
Life insurance is a crucial
aspect of your financial plan, and you should make thoughtful considerations
before buying any policy. Seek information from the insurance firm, and keep
off the blunders mentioned above.