It’s easy to make mistakes when making an important purchase, such as life insurance. While everyone wants to get a good deal, it’s not something you should walk straight into. In doing so, you could end up with a policy that could leave your family vulnerable.
But fear not, we’ll look at 9 of the most common mistakes people make when getting life insurance. As well as providing you with tips on what not to do when buying cover.
Mistake #1: Not assessing your needs and goals
One of the biggest mistakes people make is not taking the time to assess their needs and goals. Understand why you need life insurance, how much cover you require, and what type of policy best aligns with your financial objectives.
Take the time to gauge your financial position. Think about your family’s long-term goals to work out the amount of cover they need. Keep aspects in mind, such as:
- Everyday living costs like groceries and clothes
- Rent or mortgage payments
- Child care costs
- Education fees for your children or other dependents
- Household bills such as electricity, gas, internet, etc.
- Any outstanding debts you may have, including credit card bills, loan payments, etc.
- Funeral and burial expenses
Mistake #2: Focusing only on price
Choosing a policy based on price alone can be risky. While saving money is a bonus, consider the overall value and benefits the policy offers. Look past premium rates and consider factors such as the policy’s terms and conditions.
You may also want to look into the company’s reputation in case problems arise in the future. The better their customer service, the easier it will be to resolve any problems or adjustments you need to make.
Mistake #3: Not comparing multiple quotes
Another common mistake is not shopping around and getting quotes from multiple insurance providers.
Different insurers offer different rates, so try to compare quotes from at least three different companies. This allows you to figure out your options and select the policy that best meets your needs.
A quote is a snapshot of the company’s rate for a specific level of cover. But this won’t be the same for everyone. Instead, insurers will assess your:
- Health (including family medical history)
- Lifestyle habits (e.g., smoking)
The cost of your premiums will also depend on the type of policy and amount of cover you wish to buy. Essentially, your quote will be higher or lower depending on your circumstances.
Mistake #4: Choosing the wrong type of policy
Life cover comes in various types. Each type has its own features and benefits, and it’s important to choose the right one for your specific circumstances.
For example, if you want cover for a limited time, such as until your mortgage is paid, a term life policy may be suitable.
Term life insurance is typically more affordable, providing cover for a specified period. Whole life insurance, on the other hand, provides lifetime protection and is therefore more expensive.
You can also get joint life insurance – this covers two people under a single policy. Because of this, it can be cheaper than you and your spouse/partner buying separate policies.
Don’t assume that lifelong cover is the best option. After all, everyone has different needs. Consider the type of policy that suits your needs and budget.
Mistake #5: Overlooking the terms and conditions of the policy
It’s more than easy to look over the fine print when buying cover. Sadly, this is a mistake most people tend to make in general. Pay attention to details such as the types of death covered, and any potential penalties for cancelling the policy early. If there are any terms you don’t understand, ask the insurer for more information.
Mistake #6: Failing to disclosing relevant information
It’s crucial that you provide accurate and complete information when applying for cover. This includes your health, lifestyle, and any risky activities you engage in.
Some insurers may even ask you to complete a medical exam, so it’s not worth leaving anything to chance. Be honest during the application. If not, the insurer could cancel your cover, or even worse, they could deny your family a payout.
Mistake #7: Forgetting to review/update your policy
Life changes a lot over time, so it’s wise to review and update your policy accordingly. Changes in your financial situation, family status, or health may require adjustments to your cover.
Review your policy regularly, especially after major life events to ensure your cover remains adequate. This includes marriage, the birth of a child, or purchasing a new home.
Mistake #8: Relying solely on employer-provided cover
While employer-provided life insurance is a great benefit, it may not be enough to meet all your family’s needs. These policies are often limited in cover and may end if you change jobs. Therefore, it’s worth taking out your own policy to ensure your family has enough support if you die.
Mistake #9: Avoiding professional advice
It’s easy to make mistakes without professional guidance. Consider working with a reputable insurance broker or life insurance adviser for the help. They can assess your needs, explain options, and help you make an informed decision.
Buying life insurance is an important decision that should not be taken lightly. By doing thorough research, understanding your needs and budget, you’ll have all the info you need when you want to buy a policy. Head online to get started.