So, you want to do right by your family and protect their financial freedom by taking out a life insurance policy. Given how important this type of insurance cover can be for your loved ones, you want to make sure you are choosing the best life cover for your family’s needs. What better way to learn how to go about it than to learn what not to do? Here are the most common mistakes people make when looking for life cover.
Waiting Too Long To Buy Life Insurance
Life cover rates typically increase as you get older or as your health deteriorates. Some illnesses or chronic health conditions may make you ineligible. At the risk of sounding overly dramatic, the longer you put this decision off, the more it is likely to cost.
Not Buying Enough Coverage
Not all coverage is created equal. As much as you want to save on your cover policy, consider what this policy can do for you and your loved ones in the long run. People may potentially find themselves underinsured due to their belief that the insurance is too expensive or complicated, the insurance needs of any dependent children are miscalculated, or they do not consider the work done by a stay-at-home spouse. There are a few other reasons one can wind up underinsured, but there’s more sense in dwelling on those. Instead, consider taking out a policy large enough to cover the following:
- Burial or cremation
- Bills or debt payment
- Your child’s care until they reach adulthood
- Your child’s education
- Home loan payments
- Retirement security
- The basic cost of maintaining your family’s lifestyle.
Missing Payments or Late Payments
Missing or late payments can impact your policy benefits. If you miss a payment, there’s a chance that your guaranteed policy may no longer be guaranteed. While most life insurance companies allow you a grace period (usually 30), too many missed payments means your policy can lapse. However, a policy can be reinstated, and this should be done as soon as possible. The concept of waiting too long to take out a life cover policy also applies to applying to have your policy reinstated.
Naming Beneficiaries Who Are Too Young
Although children and grandchildren are likely to be named beneficiaries in a life insurance policy, it’s unwise to name minors as beneficiaries. Minor children (i.e. under the age of 18) are typically not emotionally stable enough to handle large sums of money. Since a life insurance policy is mainly intended to cover the living costs of the other members of the family, it is important that the lump sum is paid-out to someone financially responsible. By this same token, your beneficiary shouldn’t be mentally disabled or otherwise disabled on a way that would inhibit them from making complex financial decisions on their own.
Now that you know how not to go about finding your best life insurance policy, you can make the informed decision that will matter for those you hold dearest when days look their darkest. As mentioned earlier, don’t wait too long to take out a life insurance policy.