5 Key Mistakes to Avoid When Getting a Life Insurance Policy
Choosing a suitable life insurance cover can require a lot of patience and research. If you’re not careful, you might fall into some of these common traps.
Life insurance is something that most Australians consider getting at some point in their lives. Most commonly, a significant life event such as getting married or having a baby propels this decision.
The problem is that people generally want to get a life insurance policy as soon as they realise the need. As a result, many buyers end up rushing things and purchasing a policy that does not meet their needs.
Getting a life insurance policy isn’t anything to take lightly. If you don’t know enough, you may end up overpaying for a policy that you don’t need.
What’s worse, you may think that you have enough insurance – only to find out otherwise right when you need it the most.
Instead of rushing into a decision, always take your time and create a policy that best meets your situation. For a start, you’ll want to avoid the following mistakes that lots of people make when buying life insurance.
#1 – Don’t Prolong the Decision
You don’t want to rush into a decision, but don’t wait too long, either. The older you are, the more you’ll have to spend on life insurance. A person’s health tends to deteriorate with age, and you might become a riskier subject in the eyes of the insurance company.
#2 – The Cheapest Is Cheap for a Reason
Numerous studies and surveys have found a glaring underinsurance gap for many Australians. Do you know what the most common cause is?
Settling for the cheapest option available. It’s true that nobody wants to overpay for anything. But it’s also true that you get what you pay for, including life insurance.
If you’re not careful, you may end up with an overly small payout in the event of a claim or even non-coverage.
On the other hand, this doesn’t mean that the most expensive policy is also the best. The key is to pay attention to what’s covered and for how much, in addition to the reputation and financial standing of the insurance provider.
Be sure to read the Product Disclosure Statement which contains important information you should know before you agree to make a purchase.
#3 – Relying on an External Source
A lot of Australians rely on their superannuation fund to get their life insurance.
Most super funds have a life insurance aspect. However, it could be a mistake to rely solely on your superfunds life insurance cover.
It may not provide the cover you need and the amount that would allow you and your family to maintain they’re accustomed to.
But that’s not all. You’ll be using your retirement savings to pay your insurance premiums. Most Australians already don’t have enough in their super to ensure a comfortable retirement. Bleeding money out of your retirement fund will only add to the problem.
On the flip side, the life insurance premium payments through your super fund are generally cheaper. But as stated in the previous point, cheap is cheap for a reason. In any event, you can take out another life insurance policy to supplement what’s in your super.
#4 – Lying on Your Application Form
It’s not unusual for people to stretch the truth when they’re applying for something, especially if it can save them money. For example, not disclosing your smoking habit or pre-existing medical condition can result in a lower premium.
But is it worth it?
Even if the insurance company didn’t find out when they were underwriting the policy, you can bet that they will be over scrupulous when it comes to investigating claims. They’ll check and see if everything matches before approving or releasing the funds.
As you can imagine, lying on your form can result in an automatic claim rejection.
You’ll find that stating the truth is in your best interest. That’s the only way to get a life insurance policy that’s free of surprises.
#5 – Not Re-Evaluating Your Insurance
Contrary to popular belief, purchasing life insurance isn’t a one-time activity.
The first time you get a policy, you may still be in your thirties. However, the policy may become insufficient over time.
Any major event in your life will require you to revisit your policy. If you’re becoming a parent, for example, you’ll have another dependent to take care of.
Naturally, you’ll have to change your life insurance amount. That’s something you’ll have to revisit from time to time in accordance with recent life events, such as buying a more expensive home, getting a promotion, and so on.
Avoiding Life Insurance Pitfalls
Unfortunately, these aren’t the only traps that await you in your search for a good life insurance policy.
That’s why you need to arm yourself with knowledge before you start searching in earnest.
For starters, remember that life insurance is a significant long-term investment. That’s why it’s a good idea to look for a reputable and enduring life insurance providers – you want a company that will be around when you need them the most.
NobleOak is an award-winning life insurance provider that’s been around and trusted for 140 years. Get a quote today and you can start sorting out your future immediately.