There are a few things in life that can make you facepalm yourself or release a deep cry of ‘Whyyyy!’ Buying life insurance shouldn’t be one of those. Choosing a life insurance cover that will help your family even when you are no longer around can be one of the biggest investments you make. However, you can do it right by avoiding these seven common mistakes.
Not all life insurance policies are created equal
Going for the first cover that you stumble across can be a huge mistake. That’s why it’s important that you put in the effort to research and compare policies that you come across to get the best deal. This is a decision that impacts what will happen when you are gone. Ask your insurer questions concerning the cover until you are satisfied. An insurer who has your best interest at heart will go through the policy with you to ensure that you choose a cover that best matches your needs.
I’ll do it when I am older syndrome
Life insurance reminds us that we don’t have forever to live and it’s best that you be prepared sooner than later. Unfortunately, a survey released by TAL found that only 30% - 37% of Australians aged 18 – 69 held life insurance. It is for everyone, so long as you are of a legal age to acquire it which is 18 years and above.
You can cash in on your youth and health as premiums are usually cheaper when you are young. Life gets complicated the older you get, illnesses creep in and your body will not be able to do the things that it used to do, causing insurers to make you pay more.
Failing to strike a balance in terms of how much you need
Overspending on life insurance can work against you by leaving you with debt for a policy that you cannot afford or need. However, if you are looking to skimp on how much you pay you could end up shooting yourself in the foot, leaving you underinsured. According to Swiss Re Economic Research & Consulting, Australia is one of the most under insured nations in the develop world ranking 16th.
It is important that you speak to an insurer or use an online life insurance calculator that will help you see how much cover you need that is adequate to cover you. If you underestimate it can impact your family negatively as they will have to deal with the brunt of meeting mortgage payments, fees and medical bills that they can no longer afford.
Lying on your application
That little white lie eventually snowballs into something that your family will have to deal with. You need to disclose all necessary information to your insurer to make the processing of your application smoother. This also goes for fibbing on your health to save a few bucks. Disclosing all pre-existing health issues and answering the questions set by your insurer is in your best interest. It will enable you to get an adequate cover that won’t leave your family in a financial woe.
Not getting your stay at home partner life insurance
Your partner may not be beating traffic every day to rake in some money for the family, but they too need life insurance. They also play an important role in the household and should they pass on you will need that extra help to make your household function as normal. It will also assist you if both you and your partner were planning to put some money away to build a savings account, pay off debt, or pay off school fees together.
Not nominating a beneficiary
A general rule of thumb is if they are not listed they will not be covered. It is vital that you list all the people you would like to get covered in your policy. Even if they are a young beneficiary you can list them so that they can have a trust fund that they can use in future. It’s advisable that you set up a trust fund yourself and stipulate how and when the money should be used.
Not reviewing your policy
Although life insurance is set for life, you as a person change every year. That is why your policy will have to adapt to your needs. The single 18-year-old version of you with no kids is different to the 34-year-old version of you who has just started a family. Speak to your insurer to make sure that you get a plan that keeps up with the times.