Life works in mysterious ways. You may be looking forward to a job promotion, your wedding, or a memorable celebration, then eventually have to leave your loved ones behind due to your sudden death. Without the proper protection, you can leave your surviving family members with a costly bill for your final expenses. This is especially true if they are highly dependent on your salary.
Getting life insurance is essential to secure your family’s financial future and protect your loved ones from debt. To make the most out of your investment, here are some common mistakes you should avoid when acquiring a life insurance policy:
Buying the cheapest policy
Looking for an affordable life insurance policy that suits your budget is essential, but don’t forget to consider its coverage. After all, it is a worthwhile investment, so consider what you and your loved ones are getting in return. When looking for a policy, don’t randomly pick the cheapest one you can find. Explore your options and check their features and benefits until you search for one that matches your needs.
For instance, a term life policy may be an affordable option if you need life insurance only for a set period. Meanwhile, look for one that pays more in premiums for permanent coverage if you want lifetime coverage or you are interested in owning a policy that builds cash value as an investment vehicle.
Thinking you don’t need life insurance
You may think that you don’t need to be insured because you are young. However, accidents and illnesses come without any warning, and you can face this tragic situation regardless of your age.
Buy a life insurance policy sooner instead of putting off purchasing. This way, you and your family can gain peace of mind. You can also increase your chances of securing a policy at the lowest possible cost because life insurance rates generally increase as you age or your health deteriorates.
Borrowing money from your policy
Acquiring a permanent life insurance policy serves as a source of funds and allows you to borrow money as it accumulates cash value. While this is an excellent benefit, taking too much money out of your policy can cause your policy to lapse or run out of money. Therefore, all the gains you have taken out will become taxable.
You may maintain your policy after taking too much money out of your policy by making additional premium payments. Meanwhile, consult with a tax advisor first to avoid unwanted tax liability when you need to access your policy’s cash value.
Allowing premiums to lapse
You are expected to pay premiums so you can fully benefit from your life insurance policy. These premiums can be based on your insurance risk class, which involves your health, age, and other factors.
Universal life is a special type of permanent policy that offers long-term guaranteed protection at the lowest possible rate. If you’re considering buying this type of policy with secondary guarantees, avoid late payments because they can affect your benefits.
A life insurance policy is one of the most worthy investments you can make. However, some errors can jeopardize your family’s finances if you have recently bought a policy. Secure your finances and protect your loved ones by remembering and avoiding the common mistakes listed above.