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Costly Mistakes to Avoid When Buying Life Insurance

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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:

  1. Going for the cheapest option

In these tough economic times, many people opt for.

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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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

 

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