Life insurance is arguably the most vital component of anyone’s financial plan. But perhaps because it comes in varying options and there are lots of insurance carriers in the market, insurance buyers, particularly those who have less than enough understanding of its nature and process end up getting fooled and settled with something less than what they deserve. In general, insurance buyers commit similar mistakes in purchase of insurance policies. To let you avoid getting stuck in same situation, it will help to know what mistakes they usually commit and learn from those. The following are some insurance buying mistakes that you better learn and avoid:
- Undervaluing insurance requirements. Most buyers often opt for insurance coverage based on what their agents wanted to sell and the premium they can possible afford, which is the primary reason why they can’t get the most out of their life insurance. As the buyer, you must remember you tend to buy this insurance for your welfare and of the people you loved. In this case, the decision of choosing a coverage should not only depend on what is available but on its effect in the long run. Should you truly benefit from it or not. To know whether or not the coverage is adequate for you, you must look into varying factors including the repayments of your overall outstanding debt. After all the financial responsibilities do you have financial sources to generate enough income to pay the premiums? Can the coverage meet your future financial obligations?
- Opting for the cheapest insurance policy. It is understandable that for practicality reasons, you wanted to buy cheap policies. But this is just another grave mistake. Cheap policy will just be useless particularly if the insurance company cannot entirely guarantee they can fulfil your claim in instances you need it or even in the event of death. Sometimes, they fulfil insurance claims, but take a longer duration in the process. Nevertheless, it doesn’t indicate cheap policies in general, is no good. So before buying cheap insurance (if you really have budget restriction), you must first assess, and review each of your prospect insurance company’s performance in terms of fulfilling claims.
- Considering life insurance as investment and purchasing the wrong plan. Insurance buyers typically buy life insurance because they think it’s a good investment of part of retirement solution. Life insurance should be viewed as financial protection for your loved ones, particularly in the event of an unanticipated death. Taking this in mind, you will be much cautious about your options (coverage or plan options).
- Buying Insurance for Tax planning. Having insurance plan often save clients from taxes. This is true. However, buying insurance for the sake of saving tax is a worst reason you can ever have. If you wanted to save tax, insurance plan is never for you. There are other options for these purpose. You must keep in track, life insurance should be about providing life cover and not for investment return.
- Withdrawing life insurance before its maturity. Doing so can compromise your family’s financial security in case of unfortunate incident. And it is quite expensive to be withdrawn outside its real purpose.
Life insurance is of paramount importance, therefore insurance buyers should take thoughtful considerations and exercise prudence in contradiction of questionable selling process in the industry.
