Buying life insurance is not a task to be taken lightly. Your life insurance policy is the financial protection your family needs to survive your death and loss of income. To help you get it right the first time, we review 5 of the most common mistakes people make when buying a life insurance policy.
1. Not buying enough coverage
So how much coverage do you need? When investing in life coverage, it is critical that you carefully determine how much coverage your family will need in the event of your death. This is not an easy task and is best left to the professionals. Your life insurance company or broker will be able to guide you through what is known as a needs analysis, a method of calculating the amount of your benefits based on your assets and liabilities. If you are looking for a ballpark figure, you can also use an online life insurance calculator.
2. Failure to secure the life of a stay-at-home parent
A stay-at-home mom or dad may not make money, but they do a lot for the family every day. Piles of dirty laundry, endless school meals and lunches, driving here and there … How would the surviving spouse or partner pay for these services in the event of the death of the stay-at-home mother or father? Suddenly, a life insurance policy makes a lot of sense, doesn’t it?
3. Not being honest with your provider
Be scrupulously honest when answering all the questions your online life insurance company asks you. If they discover that you have withheld information, your family’s claim could be reduced or denied.
4. Not reading your policy documents
We are all guilty of this. Your policy documents come in, you put them aside thinking ‘I must read them’ and somehow it just never happens. It really is essential that you read your policy documents carefully and ask your broker or provider if you have any questions. You should take special note of policy exclusions (circumstances where your life is not covered) and premium increases.
5. Failure to review your benefit amount
Life doesn’t stop, does it? As your life changes, remember that the amount of your benefits must also increase. The birth or adoption of a child, marriage, a salary increase, and a higher debt burden mean it’s time to review your life insurance amount.
