Mistakes to Avoid When Buying Life Insurance

Having life insurance as a financial backup plan for your loved ones is a priority.

Life insurance is one of the building blocks of financial well-being. While a large percentage of persons are still not covered by life insurance, the awareness keeps growing. Even those who make an attempt to have a cover are not adequately covered. The majority of those insured are not adequately covered, and make wrong choices concerning the type of policy, policy term, etc. In this week’s article, we touch on the common mistakes people make when buying life insurance and how to avoid them.

Mistakes to avoid when buying life insurance

Withholding critical information

Some applicants fail to divulge vital information when purchasing a policy. Information such as pre-existing medical conditions, family medical history, and unhealthy life choices. Holding back such information can lead to claim rejection. It’s in your best interest to be upfront with all your information when purchasing a policy.

Delaying it for later

Some people are aware of the need for life insurance but decide to take it up later for various reasons. What most people do not know is that the longer you remain unprotected the longer your loved ones remain vulnerable. Another advantage of purchasing life insurance in time is that the younger you are, the cheaper your premiums are. So, stop procrastinating on whether you should buy a policy when you’ve done all the needed research you need to. Go ahead and purchase that policy.

Not Buying Enough Coverage

Some people make it past the procrastination stage and go ahead to buy a policy but fall short in getting adequate cover. To ensure that you purchase adequate cover, you need to calculate how much life insurance cover you need. First, consider your financial liabilities or responsibilities such as your income, your spouse’s upkeep, your children’s school fees etc. Then think about your capability to cover these expenses. The gap that life insurance must bridge, is the difference between your assets and responsibilities. That’s where life insurance comes in.

Wrong choices for your beneficiaries

When purchasing a policy, it’s essential to make sure you set up who will own the policy, these are your beneficiaries. This ensures that the purpose of buying the policy is fulfilled.

Before you go ahead to choose who your beneficiaries will be, here are some questions you should consider asking yourself:

  • Do you have more than one beneficiary?
  • Who do you want as the policy’s beneficiaries(primary and Secondary)?
  • Is the beneficiary a minor?
  • What percentage should each beneficiary receive?

 

These and a few other questions are what you should ponder on before registering any beneficiary. It is also important to note that minors are not eligible beneficiaries, because in most places around the world, minors can’t own property untill they reach the age of maturity. Instead, you can designate a trusted guardian that will recieve the benefits on behalf your minor.

Hoarding the policy from family.

Some individuals have bought policies and failed to inform their families about them. This leads to failure to lay claims. Your beneficiary will be unable to lay claims on the policy if they are unaware that you have a cover. This defeats the purpose of buying insurance for their protection. Claims must be filed for benefits to be paid.