I get it – you’d rather watch a Point of Entry marathon than deal with your life insurance policy. I got to say though, that’s some serious torment you’re willing to put yourself through just to avoid having to deal with your life insurance.
Life insurance isn’t one of those “set it and forget it” policies that you just leave in place for years until you really need it. Taking that approach to your life insurance policy could end up short-changing your family if something unforeseen happens (yes, I’m talking about you having to make a “permanent” trip to the afterlife).
Here are 3 huge mistakes you should definitely avoid when it comes to your life insurance policy:
#1 Failing to Check Up on Your Auto-Renewing Policy
Nobody likes to think about their own morality. And that’s probably why many of us choose the avoid the subject when it comes to our life insurance policies by agreeing to a policy that provides the “peace of mind” of automatic renewal.
Automatic renewal isn’t a bad thing. But when you consider that many insurance providers take your health into consideration when calculating your payments, automatic renewal could end up costing you more than it should.
For example, if you were in decent shape and smoked regularly when you started your policy, your premium would be a certain amount in year one. But if you worked out regularly, quit smoking, and got into great shape – you’d still pay the same premium.
But if you checked up on your auto-renewing policy at least once a year (item #2 on this list), you’d be able to adjust/renegotiate your policy with your insurer for a discount – which could save you hundreds per year.
Some insurers do offer renewing policies ranging from five to 30 years that will protect you “regardless” of your health condition. However, don’t blindly assume that this will make your policy cheaper (please refer to item #3 on this list).
#2 Failing to Re-evaluate Your Life Insurance Policy
Whether you purchase life insurance from a Financial Advisor (FA) or directly from an insurer – you should always re-evaluate your policy on an annual basis at least.
Change is the biggest reason why. Think about it – your life can change drastically in as little as a year. Life events such as marriage, divorce, the birth of a child, a change of employer, major surgery, a new home purchase, etc. can all have an impact on your life insurance policy.
For example, let’s say that you bought life insurance directly from an insurer three years ago, but haven’t re-evaluated it since then. While your policy hasn’t changed, your life certainly has – because during that time you purchased a new home and welcomed your first child into the world.
When you first purchased your policy three years ago, it provided enough coverage to ensure your wife was protected in the event you had to cross over into the afterlife.
However, if something were to happen to you, your life insurance coverage wouldn’t be enough to take care of your wife and child financially. That’s why it’s so important to re-evaluate your policy yearly at the very least so that you can update your coverage to ensure you have just the right amount of coverage.
#3 Failing to Check Quotes From Other Insurers
When it comes to making an important purchase, do you settle for the first offer that comes your way or grab the first item that catches your eye?
Of course most of you wouldn’t – especially if you’re trying to find a good deal. Most of you would compare the prices and weigh the benefits of several items before making a smart buying choice.
That’s good! But… why can’t more people do the same with insurance? Seriously, just because an insurance advertisement says it has the best insurance doesn’t make it true. Same goes for your FA friend who swears has the “best” insurance policy for you and is bugging you to sign on the dotted line.
The truth is that if you want the best life insurance policy for your needs – you must compare quotes from different insurers to see which policy has the best coverage at a reasonable price. Also, don’t forget to check the coverage clauses of each policy so you can know exactly what “incidents” the insurer will provide payouts for.
It’s a pain to call numerous insurers to get quotes and deal with high-pressure sales tactics, but it must be done. Or not! You could also just visit our Life Insurance Wizard so you can get competitive quotes from Singapore’s major insurers without any of that hassle.
Final Note: Interested in reading more about insurance-related issues ranging from personal accident to car insurance? Then visit our Insurance Learning Center to learn more. Also, if you’re looking for a quick and easy way to compare mortgage, car, travel, health, and personal accident insurance, visit our Insurance Comparison Page today.
What are some other key mistakes you should avoid when it comes to your life insurance policy? Share your thoughts with us on Facebook! For even more useful information on everything personal finance, visit MoneySmart today!
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Tags: Life Insurance