3 Common Mistakes You Should Avoid When Purchasing Life Insurance
Are you looking to buy life insurance? Like many, you may be buying intending to protect your family from financial risks should the worst happen. Life insurance is readily available with tons of companies offering coverage. But, some failed at buying and end up getting the wrong amount of coverage or policy as a whole resulting in more financial vulnerability. To avoid this, we listed the 3 most common mistakes people make when buying life insurance.
1. Not doing enough research before the purchase.
One of the worst mistakes people make when buying life insurance is not gathering enough information about a policy they are purchasing. This often results in not making the right financial decision during a purchase or buying a policy that does not cover what they or their family needs.
To make an informed decision, you first need the facts. The following are the most important information you must never skip knowing:
- The Policy Types
Life insurance has two major types: Term and Permanent.
Term insurance is the simplest and less expensive type of insurance. But it only provides coverage for a fixed time—often 10, 15,20, or 30 years. If something happens to you during the span your policy is active, your family gets the benefits. If you outlive your policy period, you can still have the coverage but with a higher premium.
Permanent life is a policy that provides lifetime coverage and combines a death benefit with a savings mechanism. The two primary types of permanent life insurance are whole life and universal life. This type of policy is usually more expensive, however, this builds a cash value that you can access during your lifetime to supplement retirement income or other financial needs.
While both term and permanent life insurance are designed to protect your family from financial risks, they have their differences. If you believe you’ll only need life insurance for a set period then a term policy can be an affordable option. Whereas, if you need insurance that will build cash value at the same time, then investing in a permanent policy will work for you.
- Which Company is Best
When looking for a life insurance policy don’t just go with the first company you find even if they are well-known. Remember, insurance is an individual need so it is important to prioritize the amount of protection you are going to get rather than the company that offers them.
Broaden your options by shopping around to compare coverage and rates. It’s important to note though, that it will be best not to randomly shop around the internet for quotes. Rather, shop for the best-experienced agent who represents many companies. Otherwise, your name will likely get sold and you’ll get all kinds of calls and solicitations.
If one company doesn’t offer the right kind of coverage that fits your needs, another company probably will- so weigh your options well. Doing so will help you see if the life insurance policy is a good deal and if it will give you the most value in terms of coverage. You also need to ensure the company you purchase your policy from is legitimate and reputable.
Getting these facts right will surely help in your buying decision. Having the knowledge and ability to compare the pros and cons of different policies and companies out there is a must for anyone interested in purchasing life insurance.
2. Giving too much focus on the premium.
The premium, or cost of life insurance, is important for everyone. But if you focus too much on price alone, you could be putting yourself at a disadvantage. Remember, price is not always equal to value. Just because the policy is cheap does not mean it is the most comprehensive or will provide you with the most value- the same goes for the expensive ones. You are purchasing life insurance to protect your family from financial risks. So, you don’t want to be underinsured and make your family financially vulnerable just because you purchased a policy based on price but were not able to provide coverage where you need it.
Also, while companies offering policies with cheaper premiums are enticing, you will want to make sure that they are reputable, have good financial health, and can provide good customer service-especially when you make a claim
Thus, instead of focusing on the premium alone, focus more on the value and benefits you will be getting. Find the policy that fits your needs at the most REASONABLE price, from a reputable company. While we like to pay for cheaper premiums, the amount of protection it will provide should always come first.
3. Waiting too long to purchase.
You may have all the information you need and the company you consider buying insurance from, however, you think you don’t need to buy it right away. But did you know that age is one of the most significant factors that affect insurance premiums? While we don’t want you to impulsively purchase a policy, it is also important that you don’t wait too long- because the older you are, the more expensive your policy can become.
Most companies consider age and health conditions as major factors in determining the policy premium you may qualify for. The risk of getting serious health problems increases as you age and if you develop them before purchasing a policy, your premiums can get expensive, or worse, you may be unable to qualify for it. Therefore, you’d never want to wait too long to buy a policy.
We don’t know when our time is up. Waiting and taking a long time to think about purchasing life insurance is not a good plan. Life insurance companies offer a thirty day free look period. So, there is no good reason to not take action.
Purchasing life insurance is an important decision you should make. Of course, some pros and cons come with it. That’s why before committing to a policy, do your research and avoid the common mistakes others make when buying. Find the policy that fits your needs and avoid focusing on price alone. Then when you are ready to buy, don’t wait for too long. By applying these tips, you’ll be able to purchase a policy that provides you with the most value and protect your family in the future.
Bonus Tip: It is also important to understand that life insurance may not be simple. Researching, or consulting with an insurance specialist can help you find the coverage and right company for your insurance needs. Therefore, it is important to seek advice from people that are knowledgeable and can guide you during your life insurance journey. IST has licensed specialists to help you with your insurance coverage needs. We strive to find you the bigger savings, better coverage and provide you with the best support. You can start by contacting us at 763.244.3731 and we will help you find the right policy that will leave you secured and satisfied.