Common Mistakes People Make When Purchasing Life Insurance
31st Aug, 2013
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What are some common mistakes people make when purchasing life insurance? We tell you about them here, so that you can avoid these pitfalls when it comes to your own life insurance policies!
Trusting Quick Online Quotes
The Internet is full of online forms and calculators that rapidly provide a life insurance rate quote. These tools are handy for getting a ballpark estimate of what you might pay. But, it takes more to pinpoint an accurate rate. Your unique situation, age, health, medical history, needs and budget must be properly assessed to get an appropriate amount of life insurance and term length – and an accurate rate. Plus, only a licensed life insurance agent can provide you with an accurate rate (based on your health profile) and sell you life insurance.
Purchasing Unsuitable Term Length or Coverage Amount
How much coverage do you need? For how long? There are plenty of variables to consider. Coverage amounts of Rs 25, 00,000 or Rs 50, 00,000 can sound like fortunes. Unfortunately, some people discover too late that the money didn’t cover everything they had intended. It’s important to figure out your current expenses and do your best to accurately assess future ones. A licensed life insurance agent can help at no cost to you.
Purchasing Life Insurance that is not Medically Underwritten
Without a medical exam, the life insurance company cannot as precisely determine who is healthy or not, so it spreads the mortality risk across all of the policies and averages the cost. With these types of life insurance policies, people with a greater risk for dying (higher mortality risk) are paying the same rate as those who are healthy (lower risk). If you are healthy, medically underwritten life insurance can often save you money. With an accurate health profile, the life insurance company can place you in the appropriate rate class, and charge you according to your specific health situation.
Neglecting to Periodically Review Your Policy and/or Needs
It’s smart to review your term life insurance policy in the same way you might review other aspects of your financial or retirement plan. The life insurance coverage that fit fine when you first got your policy might not be the best for your needs anymore. You might decide you need more coverage – or less.
Relying Solely on Employer Coverage
Employer-provided life insurance is a wonderful benefit, but it can be risky to rely on it as your only coverage. In many cases, it simply doesn’t offer enough protection. It’s typically considered a general perk – one that isn’t based on your specific needs. By having a personal life insurance policy, you can secure enough coverage to protect your loved ones and tailor it to your specific life insurance needs.
Overlooking Expenses that Should Be Considered
When people shop for life insurance coverage, many focus primarily on the most obvious expenses, which could result in being drastically underinsured. Here are some commonly overlooked expenses you should take into account:
Assuming Smokers or People with Health Problems Cannot Get Coverage
Policies are available for smokers and people with health conditions, but it’s important to be honest with your life insurance agent. It will help the agent to give you the information you need to get the appropriate coverage. The medical exam will reveal tobacco usage (including the nicotine used in transdermal patches). If you quit smoking or your health improves significantly after getting your policy, you can always speak to a life insurance professional to see if it’s possible to qualify for a lower rate.
Insuring Only the Primary Breadwinner
Many people think only in terms of insuring the family’s main breadwinner. It’s important to recognize that a person maintaining a home and caring for a family has a financial value, even if they are not currently earning money. If an individual takes care of children or another person in the home, such as an elderly parent, the caregiver’s death could create unexpected – and significant – expenses. These costs can run for years and really add up.
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