Have you ever agreed to the terms and conditions of a social media site, without reading them? Few people spend much time reading the terms and conditions we come across on a daily basis.
Similarly, many people ignore the terms and conditions of legal contracts, including those of their insurance policies.
Getting life insurance is relatively straightforward. But it is important to understand that the terms and conditions listed on your insurance policy are there for a reason. Not reading that fine print can be an expensive mistake in the long run.
Mistakes that People Make While Buying Life Insurance
Let’s discuss the most common mistakes people make when buying life insurance. With proper planning, most of these are easily avoidable.
It is safe to say that most people procrastinate. But if there is one place where procrastinating can cost you, it’s while buying a life insurance policy.
Buying life insurance at a young age can mean paying premiums as low as $20 per month. However, the cost of life insurance starts to quickly increase after age 40. So, it’s better to get insurer sooner than later.
2. Buying the Cheapest Policy
You may think buying the cheapest insurance policy is a good strategy. However, if you pay lower monthly premiums, chances are that it will provide less comprehensive coverage.
Before buying life insurance, it is essential to look at policy details. Make sure the coverage amount and term length are enough to cover your family’s needs.
3. Not Exploring Different Types of Insurance
When people talk about insurance, they usually think of life insurance. Although life insurance is an important investment for your future, you should also think about other types of insurance policies.
What if you become disabled, or get diagnosed with cancer? Disability insurance or critical illness insurance policies can to help cover you in these situations. These policies can help supplement your lost salary or medical bills while you recover from your illness
4. Not Thinking of Insurance as an Investment
Many people are unaware that buying a permanent life insurance policy acts like an investment. Whole life policies provide not only a death benefit, but also a potential cash value.
When you pay monthly premiums on a whole life policy, part of your premium goes towards building the cash value. This cash value money that is invested in different investments. You can borrow against your policy cash value, or pass it onto your dependents upon your death.
5. Getting the Wrong Term
Another mistake that people make while buying life insurance is not choosing a long enough coverage term.
Let’s say you purchase a 10-year term policy at age 45. Your premiums will be lower than for a similar 20-year term policy. However, if you renew your policy again at age 55, your monthly premium will go up significantly. In the long run, it’s cheaper to get insurance for the appropriate term length to match your coverage needs.
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6. Visiting High-risk Countries
One cannot emphasize enough the importance of reading the terms and conditions of your policy. Certain countries are considered high-risk by insurance companies due to reasons like war, epidemics, conflicts, etc. These countries are often excluded from insurance policies, meaning you have no coverage if you travel there.
If you spend a lot of time traveling, it is wise to read the fine print and see if any high-risk countries are mentioned. You can also ask your insurance broker if they have any such policy.
7. Dangerous Job
Just like high-risk countries, there are some high-risk jobs as well. These include careers like: police officers, pilots, construction workers, miners, etc.
Many insurance carriers will either exclude these jobs from their policies or deny coverage for them altogether. Others might specialize in this niche, so you’ll want to consider getting quotes from several insurance companies.
8. End of the Policy
To reduce the cost of renewing your policy when it ends, try to look for insurance that has a convertible policy. Or a policy that has a guaranteed renewal. These types of policies decrease the cost of renewal by not requiring new medical tests at the time of conversion.
The Bottom Line
Should you buy life insurance?
If this question is something you have considered, now is the time to act and buy life insurance. By purchasing a life insurance policy, you should try to avoid these common mistakes. Analyze all aspects of your policy, read the terms and conditions, and talk to your insurance broker to make sure you have adequate coverage for your needs.
This is a guest post contribution by Greg Rozdeba, the Co-Founder of Dundas Life, which is transforming the way Canadians buy insurance. With no high-pressure sales tactics, no unnecessary paperwork, and leading digital-first experience, you can find the right insurance coverage from the comfort of your home. Get started in 5 minutes or less!