Life Insurance Do’s and Don’ts

Follow these basic do’s and don’ts rules to ensure that you go about buying life insurance the right way so that your beneficiaries will not receive any nasty financial surprises should you pass away or become ill or disabled. Take a leisurely look at the following list of do’s and don’ts of life insurance before signing up with a life insurance company.

The Do’s and Don’ts

  • DO your homework before buying life insurance. The old timers used to say your policy should just cover what your estate would owe if you died or could not work any longer, but things are a bit more complicated now. You may want to cover your child’s education, for instance. A broker can advise you here – but don’t be pressured into buying cover you don’t want or need.
  • DO go shopping. You should get about five quotations for exactly the same cover from widely differing companies, e.g. large, small, well-established, newer companies. You will be amazed at the wide difference in premiums for exactly the same coverage.

 

More!

  • DO review your policy regularly – at least every six months or, at the very least, on its anniversary. As your circumstances change you might want to alter the coverage. Some of the changes might include bereavement, marriage, birth or death of a family member, sale or purchase of a property.
  • DO purchase renewable and convertible cover when you buy term insurance. If it is renewable you can renew the policy for a further term regardless of your health status. And if you have the option to convert the policy, you can replace it with a whole life, or universal, policy.
  • DO ask for a reduction in premiums if you have given up smoking. You can save a fortune this way – up to 50% in premium payments, in some cases.
  • DO not be tempted to buy life insurance for children where it is not clearly necessary. The main purpose of life insurance is to secure the financial futures of dependents of the policy owner. Children do not fall into that category.
  • DO consider buying a long-term or whole life coverage if you have investments including shares, property or even a business that you would like to pass on to your dependents in the case of your death. This should be structured so the amount covers taxes and any other expenses that will be incurred with the transfer of these assets to the beneficiaries.

 

The Do’s and Dont’s

  • DON’Tsign up for life insurance unless you understand every part of the policy and its intention. Once again, it is important to remember that the prime importance of life insurance is to provide financial security for your dependents should you pass away. You can lose a lot of money buying life insurance you don’t understand
  • DON’T buy a life policy that is linked to accidental death or any other death circumstances. Life insurance needs are the same no matter how you die.
  • DON’T hesitate to ask family or friends to refer you to a reputable insurance broker. Trust counts for a lot in the insurance game. If you really don’t like the person, though, then just make your excuses and move on to the next one.
  • DON’T cancel an existing policy before you have put the new policy in place.
  • DON’T treat your life insurance as an investment. This is not what it is meant for and, in any case, you won’t be capable of enjoying the benefits of the “investment” in any case.
  • DON’T buy life insurance if you don’t need it. A single person needs very little life insurance if they have no dependents. Enough cover to pay debt is generally all that is required in this instance.
  • DON’T buy term insurance that involves long periods. Five and ten years are the standard term periods. Rather buy universal or whole life, insurance.

 

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All info was correct at time of publishing