Let’s be honest. Life insurance is not a fun subject to talk about. It’s grim and distressing, and you probably will never bring it up after-work drinks with your mates. But just like taxes, it’s a responsibility you simply cannot avoid. Protecting yourself and your family’s financial future in case of an untoward incident is paramount for us all.
Life insurance is not a small purchase. This one buying decision will stay with you for many, many years. Therefore, it is important to avoid mistakes at all costs. To understand the most common life insurance buying mistakes and how you can avoid them, you first need to recognize the various aspects of life insurance.
Aspects of Life Insurance
1. Premium is directly proportional to your age
When you are young, it’s easy to believe that you don’t need life insurance. What most millennials fail to understand is that life insurance is an income replacement tool for their loved ones. Which is why the biggest mistake most people make while buying life insurance is waiting too long.
It is no secret that the premium amount a 40-year-old will need to pay is much, much higher than what a 25 or 30-year-old would pay. Waiting too long can make life insurance a monetary burden instead of something that is supposed to provide you peace of mind.
2. Personal assessment
There are various types of life insurance policies available in the market today, such as term insurance and permanent insurance. Understanding whether you need a policy for a set amount of time (term insurance) or a policy that will run indefinitely till your demise (permanent insurance) is one of the first things you need to figure out.
You also need to determine the amount of coverage you will need, depending on your financial liabilities. Underestimating your needs is a mistake you must avoid while buying life insurance.
3. Individual insurance vs group insurance
One of the perks many professionals enjoy today is being covered under the group insurance scheme by their employer. While this benefit may seem lucrative in the short run, you need to consider what will happen when you leave the organization or switch jobs?
Also, the group insurance plan may not be suitable for your family’s unique needs. Individual life insurance, which is customized to your specific requirements, cannot be surpassed by any group insurance scheme.
4. Periodic review of the policy
It is advisable to review your life insurance policy details every year. It is not uncommon to see an ex-spouse as the beneficiary of the policy or to discover that children are missing from the list of beneficiaries.
Which brings us to the big question: Do I really need life insurance?
Why Do You Need Life Insurance?
One of the most fundamental factors you need to consider while debating whether you need life insurance or not is this: In case of your sudden or untimely death, will someone in your life be adversely affected by the loss of financial support? Don’t confuse this with: Who will mourn my death? There is no doubt your friends and family will be sad to lose you, but will they be in a position to take on your financial liabilities?
- If you have a personal/home loan, is your spouse or next of kin financially stable to pay off your debts in case of your untimely death?
- If you are a parent, is there an arrangement in place to take care of your children’s education and other needs?
- If you are a business owner, do you have a succession plan in place to ensure the smooth continuity of your legacy?
If you answered ‘No’ to any of the questions, you need an insurance plan to cover your bases, ASAP!
Life insurance may seem complex and overwhelming at first, but there is nothing that cannot be solved through professional advice. Consider factors like your financial goals, inflation, your debts and other liabilities, your dependents etc. before you buy one! If you are not sure about what kind of life insurance you require or which policy would meet your financial obligations, visit online brokers site like Coverfox.com and compare options for you. And don’t be afraid to ask questions, because when it comes to securing the future of your loved ones, nothing but the best life insurance plan will do.