There is a lot that can go wrong with personal insurance, below are the five most common mistakes people make when taking out personal insurance. We’ve all heard of the horror stories about an insurance policy that didn’t pay out or became too expensive. In most of these cases the person didn’t fully understand what they were buying or for the sake of a few dollars took the cheapest or most convenient option.
Below are the five most common mistakes people make when taking out personal insurance.
Taking the first offer
These days it is easy to buy life insurance. You can buy it at the bank, department stores, through professional associations or directly from the provider. This may save you time and the trouble of shopping around but you might not be getting the best cover. The ability to compare specialist insurance providers means you can select the most suitable cover in the market. By comparing different providers you can get a policy at a price that suits your needs. Each individual is different and while the one size fits all approach is convenient it by no means is the best or most cost effective way of managing your personal risk.
Insuring only the Primary Income Earner
Often people insure the primary income earner and give little or no consideration for their partner. However if something was to happen to your partner the financial impact can be just as severe. We all have different roles in a relationship and it can be difficult to attribute a value as in reality a couple is a team, and a team simply doesn’t work without the partner regardless of them being the main income earner. Your ability to earn would be effected as you would be forced to take time off work to run the household at an emotional time.
Comparing Quotes
There is more to researching the best insurance policy than getting a few quotes. There are several issues with comparing just the quotes see The Problem of Comparing Life Insurance Quotes.
This is because not all insurance policies are created equal.
If you were buying a car you wouldn’t compare the luxury brand Porsche with a new manufacturer like Great Wall without expecting a difference in price. It is the same with insurance, some providers offer policies rich in benefits and features which are priced accordingly. Other providers offer basic cover at a lower cost. In the event of a claim the ‘rubber hits the road’ in terms of insurance, do you want a top of the line high performance policy, or a basic model with a limited track record.
Insurance is just like most products and services – sometimes you get want you pay for.
Premium Structure
The number one reason why people drop their life insurance is due to the increasing costs associated with stepped premiums. Traditional stepped premiums increase each year with your age. The premiums start off low and increase each year as you get older. What initially starts off as the cheaper option results in costing more in the long term and forcing you to cancel your cover when still required.
Level premium does not increase with your age. Premiums remain the same for an agreed period of time saving you thousands of dollars over the term of a policy and giving you affordability when you still require cover.
Policy Ownership
One of the most overlooked aspects of life insurance is policy ownership. This often happens when people do not receive advice or try to do it themselves. In the event of a life insurance claim the provider will pay the deceased estate, and so begins a lengthy legal process and probate which normally takes six months before the funds can be distributed. In the meantime there are funeral costs, mortgage or rent payments and the day to day costs of living. Utilizing different policy ownership structures can bypass the long and sometimes expensive legal process of distributing an estate and make the funds available immediately.
For more information talk to one of our advisers, we can help take the hassle the out of selecting a wait period that suits you.