Life Insurance – What Are The Common Mistakes You Need To Avoid
Thursday, April 12th, 2012It’s intimidating to buy a life insurance especially if you don’t have an idea how much you will need with the so many available options. No wonder so many people make mistakes when buying life insurance. Always know the limitations on the death benefits of your coverage. A life insurance quote will often have a section with special clauses and exclusions that can greatly affect your policy. The normal exclusions prevent the death benefits for policy holders with particular dangerous occupations those lying on their applications and for death because of dangerous activities like skydiving. Clauses restrict pay outs for suicides and other untimely deaths in the first to two years of the policy. These are put in place to protect the insurance provider, but they can be very problematic for the life insurance buyer when they are ignored.
Not matching the length of the policy to your need. If you have children it is suggested that you get the policy covers you until your youngest child graduates from college. All too often, people leave their families financially exposed. A 10-year guarantee may be renewed in the 11th year but it’ll cost more and you may not have the same health condition at that time to buy a new policy with the same terms. It’s safer option to have a policy that maintains coverage at guaranteed rate for 20 to 30 years.
Buying life insurance that does not require a medical exam. It is often 2 to3 times the price of normal life insurance and not worth it if you are perfectly healthy. Medical exam may be very uncomfortable but it will save big bucks per year. If you will multiply that by 30 years or whatever length you plan to keep the life insurance policy just imagine how much you will save. Another common mistake is buying the life insurance policy with the intent to commit suicide. Ok, this is silly but there are people that face depression and have suicidal thoughts. First, this idea is not going to pay because most insurance company and policies have this suicide clause that states if you commit suicide within the first 2 years the company will not pay the death claim.
Another key item in the list of mistakes to avoid is assuming that your life insurance premiums won’t change. If you’re buying a level term life insurance policy, premiums should stay the same, but some other types of life insurance may have variable premiums that change each time the policy is renewed. Look for information about how your rates are determined and make sure it will not be changed regularly. If you are confused about the language of the life insurance quote, call your insurance company right away for clarification, especially if there’s a key term that you disagree with.
Not telling the truth on life insurance application. Be honest from the beginning, It goes without saying that your individual health is determined from your weight and blood pressure to medical history and prescription drugs that will significantly affect the premiums. For example a 40-year-old smoker is expected to pay around $3,900 per year for a 20-year, $1 million term life policy. That’s about 6 times of what his healthy non-smoking counterpart would pay. It’s especially important to shop around if your health is less than stellar since various carriers are willing to take on different kinds of risk. Initially, you will be quoted based on the information you provide on the application, but because all of this information is verified via a medical clearinghouse and health exam, forging the numbers will get you nowhere.
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