Buying life insurance doesn’t have to be a complex, opaque process that leaves you receiving significantly less than you paid for when you need it the most. Unfortunately, many people discover they made the wrong choices when it is too late as a result of making one of these 7 mistakes.
Mistake #1: Going with the lowest quote available
There are so many offers out there for low-cost life insurance that many people assume that they should just opt for the lowest, most competitive offer. This low quote, however, is usually low for a reason – it only offers minimal coverage and doesn’t apply to many unique situations.
For example, for people who travel or work internationally, it can be tempting to use Local coverage because it appears slightly cheaper than International or Expat life insurance coverage. Yet, what’s saving a few dollars each month if it means the policy provides insufficient coverage?
Mistake #2: Buying life insurance from the same company that sold you auto or home insurance
Often, people make this mistake because it’s easier – or because they believe that there’s some magic involved in bundling all their insurance offerings – home, auto or life – with the same carrier. That ignores the competitive aspects of getting insurance quotes from the broader market, or the specific strengths and weaknesses of some insurance carriers.
Mistake #3: Not understanding how much coverage you will need
This mistake is similar to going with the lowest quote. You get what you paid for, and you may end up with a policy that does not pay enough to the beneficiaries (i.e. your family members) when they need it the most. This is where you need to do some serious thinking about the amount of coverage that your loved ones will need in the future.
Mistake #4: Not understanding key differences between insurance offerings
One major difference in insurance offerings that most people don’t understand is the difference between term life and whole life. But there are plenty more differences. For example, the difference between accidental death and accidental permanent loss, or the difference between “life plan” and “life care.” That’s where an insurance adviser can really help you to find exactly what’s best for you.
Mistake #5: Not double-checking that a policy provides coverage when you move overseas
Most life insurance policies will only cover you when you are living and based in country where the policy was issued. Always double check the terms and agreements of the policy before you move abroad and plan to review this with a local financial adviser in the new country where you will be living.
Mistake #6: Owning an insurance policy that doesn’t pay out when you need it
You want to make sure that if something does happen, your family will receive the insurance money quickly and without problems. You don’t want your family to be forced to debate arcane terms and conditions.
Mistake #7: Having a policy end right when it’s needed the most
Most people buy and forget, assuming that life insurance will extend indefinitely. But, depending on the type of insurance product that you purchase, there are very defined rules of when and how the policy will pay out. If you live longer than expected, for example, your term policy may no longer apply.
Putting all this together, you want to make sure that you are not paying way too much for not enough coverage, and that the policy will pay out when you need it the most. Your peace of mind is also the peace of mind of other family members who depend on you.