4 mistakes to avoid when getting a life insurance policy
A life insurance policy is like an all-important safety blanket that covers the policyholder’s family members for years. It enables individuals to future-proof their families financially. As one can expect, buying an insurance policy is a process filled with documentation and key decision-making at every step. Naturally, there are many mistakes that could be made along the way. Here are some of the main mistakes that must be avoided while purchasing life insurance:
Focusing only on the premium before buying
Not purchasing sufficient coverage or neglecting the tenure while buying life insurance policies is one of the biggest mistakes buyers can make. Unfortunately, many buyers solely focus on the premium amount they are supposed to pay instead of delving deeper into the coverage and length of a particular policy. This may result in insufficient policy for a buyer’s family. One may also easily underestimate how much coverage their family will need in the future to get by. To avoid this, buyers must consider factors such as future goals, inflation, tuition fees, and others instead of only concentrating on the premium amount of a policy. If one does not choose an insurance policy with adequate coverage and tenure when they are younger, they may end up paying a higher premium in the future.
Not comparing multiple insurance providers
Research is key before one buys a life insurance policy. This “homework” phase involves comparing multiple insurance providers in the market before buying the one that best fits all requirements. One must avoid purchasing the cheapest life insurance available. Instead, they can look for policies with higher coverage in exchange for a moderate, reasonable premium.
Individuals need to compare various facets of the policy, such as popularity, customer reviews, the experience of the insurance provider, and others. Essentially, an apples-to-apples comparison between providers A, B, C, and D.
Relying completely on employer-provided coverage
Employers offer supplemental group insurance to their workers. However, it is not enough to cover all the worst-case scenarios for the employees. For example, the death benefit offered by the employers to a deceased employee’s family members may not be enough to sustain them for long. Additionally, such group insurance plans are not portable, meaning they cease to be effective once an employee leaves the organization. Therefore, one must not short-change themselves by not buying insurance independently or purchasing a policy with inadequate coverage due to incorrectly believing that they have their employer’s group insurance coverage to fall back on.
Not reading the fine print
Despite most financial advisors urging individuals to read all documents before purchasing a life insurance policy, most buyers rush with the process and fail to read the fine print. That is a huge mistake, and it can lead to serious issues in the future. Therefore, one must carefully read all the terms and conditions, exemptions, inclusions and exclusions, and other key details before putting pen to paper on a life insurance policy document.