The right life insurance policy will not only give you peace of mind throughout your lifetime but also ensure that your dependents can meet their financial obligations in your absence. Before settling on a life insurance policy, you want to evaluate it and see whether it covers all your needs. This is because even a slight mistake can end up ruining your whole life insurance coverage. These mistakes include:
1. Fully Depending on Employer-based Coverage
You should never fully depend on your employer-provided group life insurance policy for several reasons. Firstly, the employer has full control over group life insurance, and so, the insurance company may increase premiums based on the employer’s decisions. Secondly, considering group life insurance is cheaper, it has lower limits and many exclusions, a perfect recipe for underinsurance. In fact, a typical group life insurance policy provides only up to $50,000 worth of coverage. Lastly, if you switch jobs, you will not be able to retain your coverage. Therefore, you should complement your group insurance with an individual life insurance policy.
2. Withholding Information During Underwriting
During the underwriting process, insurers typically ask for information such as your medical history, your family’s health, occupation, and lifestyle to determine your life insurance eligibility. Depending on the type of policy you want, you may also have to undergo a medical exam. During underwriting, you don’t want to lie or keep any crucial information from the insurance provider, particularly because this can result in policy denial. If your death results from something related to the information you withheld during underwriting, the insurer may also deny the claim.
3. Going for the Cheapest Coverage
As much as you want to save on your life insurance coverage, you shouldn’t settle for the cheapest policy, especially if it doesn’t meet your insurance needs. Research shows that most Americans typically overestimate the cost of life insurance, and such a thing can make you settle for the cheapest yet inadequate coverage. If you want enough life insurance coverage, you may have to pay a little more, especially if you want whole-life insurance coverage. Healthy people with clean driving records generally pay less for life insurance coverage.
4. Postponing to Buy Life Insurance
The cost of life insurance largely depends on your age and health status, with older and sick people paying more. Therefore, you shouldn’t wait until you attain a certain age to purchase life insurance. Instead, buy life insurance when you’re still young and healthy, as your life insurance coverage will likely be cheaper. Another option will be to go for a term life insurance policy if you think it’s too early for you to get a whole-life policy.
5. Not Shopping Around
If you compare rates from different insurance providers, you are likely to land a life insurance policy that not only fits your budget but also serves your insurance needs. A recent LIMRA study revealed that the high cost of life insurance is one of the main reasons for the high levels of uninsurance in the U.S. By shopping around, you can greatly save on life insurance costs and even get better terms.
How to Avoid These Mistakes
The best way to avoid the mistakes discussed in this article is to work with an experienced insurance agent. Hoffman Brown Company will help you find a life insurance policy that provides you with adequate coverage both when you’re in state and out of state.
