Life insurance is tailored to provide financial security to your family or loved ones when you pass away.
Depending on your situation, those funds can be utilized to pay off debt, pay for your children’s education, or fund the retirement of your spouse.
Life insurance will cover for your loved ones when you are not around and could be one of the biggest investments that you could make. However, you need to avoid the following mistakes if you want to be properly insured.
Waiting too long to buy insurance
Chances are, you’re not getting any younger. Meaning, your life insurance isn’t going any cheaper any time soon.
According to data, life insurance is 3x cheaper when you’re 30 than at age 50.
When you secure a policy when you’re younger, you already lock in that rate, getting it a lot cheaper than you would when you age.
Meanwhile, the price for life insurance increases as you grow older and your health deteriorates. In some cases, certain illnesses and health problems could even make you ineligible.
So, the longer you put off purchasing one, the more it will cost you in the future.
Focusing only on the price of the policy
There are some cases that the overall costs of a specific insurance policy are enough to drive you away. You might even consider reducing the amount of your coverage.
But life insurance is something that you couldn’t afford to miss out on. Think about the difference it could make to your family after you’re gone.
If you think that purchasing one could be too pricey, the people at ServicePros Life Insurance NZ advise that you take a closer look at your budget. See what are the things that you can cut back before you decide on less coverage than you actually need.
Failure to compare life insurance rates
Opting for the first life insurance that you stumble upon is a big mistake. This decision can have a massive impact on what will happen after you’re gone.
That’s why it’s vital that you put in the effort doing your research, as well as compare different policies to get the best deals out there.
So, don’t hesitate to ask questions about the policy until you are satisfied. An insurer who has your best interests will thoroughly go through the policy with you so that you choose the best coverage that’s specifically tailored to your needs.
Failure to understand you’re needed coverage
Some people often underestimate the amount of money needed to protect their loved ones.
How much money your families need and how long they’ll be needing it are the most essential factors that you need to consider when choosing the right coverage. A financial advisor could help you with the calculation.
Lying on your application
Telling a little white lie could potentially snowball into something serious that your family might have to deal with later on. That’s precisely why you must disclose all the important information to make the entire process as smooth and as seamless as possible.
This also includes fibbing about your current health condition for a couple of dollars. You need to disclose all your pre-existing health conditions and answer the insurer’s questions in your best interest.
Doing so will allow you to get an adequate cover and protect your loved ones from financial ruin.
Naming a minor as your beneficiary
If your beneficiary is a minor, and you pass away before he officially turns 18, then he will be unable to acquire your policy’s death benefits. Unless a legal guardian is officially appointed by the court.
The process could take time, and will also cost money for the court and attorney fees. Apart from that, you also risk releasing your death benefits with someone you haven’t necessarily agreed to be in charge of those funds.
That’s precisely why you should name an adult as your beneficiary. Alternatively, you can create a trust for your children. That way, you can direct how the money will be spent.
It’s also a great idea to revisit your policy regularly to update your beneficiaries. That’s especially true for significant life changes like in the event of a divorce, marriage, or the birth of a child.
Canceling a policy before securing a new one
The rates for term life insurance has dropped dramatically over the last couple of years, making it a reason to switch insurance policies in most cases.
But if you’re planning to replace your policy with a new or a much affordable policy, we advise that you only do it when needed.
After deciding on an insurance policy, do not make the mistake of just putting it in a drawer and forgetting all about it.
As mentioned earlier, you should take your time to regularly review your policy. You should also see to it that your life insurance coverage still fits your needs.
Knowing the type of coverage your need will give you peace of mind, not just for yourself, but also for the ones you love.