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 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, update your list of beneficiaries 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.
