Have you decided that now is the time to get life insurance cover? If you have people who depend on you financially, it’s never a bad idea to have protection in place just in case the worst ever happens.
Buying life insurance is generally an easy process, especially if you’re buying online. However, there are still plenty of pitfalls you should be aware of, so you make the right decision when selecting a policy. Here are 5 scenarios you’ll want to avoid.
1. Waiting too long to buy cover
It’s easy to put off buying life insurance, but if you leave it too long, you could forget all about it. The last thing you need is to die without having cover, leaving your family without financial support.
Like any type of insurance, you are required to pay a premium to your insurer. These premiums are usually based on factors such as your age, health, and the amount of cover you wish to have.
Buying cover later in life could result in higher premiums due to being older, which insurers will consider a higher risk.
For the best results, it’s best to buy life insurance as soon as you feel it is needed. Or, if you think it may be needed in the future, it might be wise to purchase a policy sooner rather than later. This not only locks in lower premiums but also ensures that your loved ones will be protected financially.
2. Not fully understanding the policy terms
How many times have you looked at the terms and conditions of a product and just skimmed through them without really understanding what they mean? We’re all guilty of this at some point. However, when it comes to life insurance, taking the time to thoroughly understand the policies t’s & c’s is crucial.
Many people make the mistake of assuming that all policies are straightforward and offer similar benefits. In reality, different insurers may have varying definitions for key terms, as well as what is covered/excluded.
For instance, some policies may not cover certain causes of death or might have specific conditions that must be met for a claim to be honoured. It’s essential to read the fine print and ask questions if you’re unsure about anything.
3. Buying the wrong type of policy
Life insurance is typically sold in two forms – as whole life insurance, or as term life insurance.
Whole life insurance is great if you want to be protected for the long term. The policy pays out a lump sum regardless of when you die (provided you pay your premiums) This way, you can rest easy knowing your family will receive support no matter when you die.
With term life insurance, you choose how long you want the policy to last (for example, 20 years). This could be handy if you feel you only need cover for a certain timeframe such as until your mortgage is paid off. The main downside is that the policy will only pay out if you die within the agreed policy term.
Sometimes people make the mistake of choosing one type of policy over the other without considering their specific needs and circumstances. Whole life insurance tends to be more expensive but offers lifelong cover, while term life is generally more affordable and suitable for temporary needs.
4. Paying too much for cover
People often make the mistake of buying life insurance without shopping around or comparing quotes from different insurers. This can lead to overpaying for cover that might not suit your needs. Each insurance company has its own pricing structure, so premiums can vary significantly for the same level of cover.
To avoid paying too much, it’s important to get multiple quotes or speak with an independent insurance broker. They can provide insights into policies and help you find the best deal for your situation.
5. Having too much/little cover
More often means better right? Well in the case of life insurance that’s not always the case. Having more cover than you actually need could also mean paying more in premiums. On the other hand, not having enough cover could leave your loved ones financially vulnerable in the event of your passing.
To avoid such scenarios, make sure to consider any financial obligations you have, such as your mortgage, debts, and future expenses (like your children’s education) when figuring out how much coverage to purchase.
You should think about any future expenses that could arise such as having kids or retiring, to ensure that your policy aligns with those potential needs. It’s also wise to review your policy periodically, especially after significant life events (like marriage, divorce, or the birth of a child) to ensure your coverage remains adequate.
If you’re ready to buy life insurance, be sure to look out for these mistakes so you can make an informed decision that best suits your needs and protects your loved ones.
