Life insurance: Know most common errors people make
Life insurance is one of an investor's arsenal's most important but underutilised financial tools.
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FollowThe investment journey can be intimidating for beginners; however, this can lead to mistakes that could have been avoided. Along with investing, life insurance is one of the most sought-after plans, as almost every taxpaying individual will invest their money and purchase life insurance.
Life insurance is one of the most important but underutilised financial tools in an investor's arsenal. With the growing awareness of the importance of life insurance, an increasing number of people are purchasing it; however, they make numerous critical errors. Here are some of the most common.
Not purchasing it early
People in good health believe that they don't need insurance because nothing is wrong with them right now. However, they avoid the fact that term insurance premiums are low at younger ages and locked in. When a person purchases at a later age, the premium amount increases significantly.
Too many policies
Many people purchase numerous policies, but this does not always imply that they are adequately protected. Life insurance is more than just a death benefit that will provide for their family in the event of their death. The sum that the policyholder requires is the sum of their future financial goals and existing liabilities.
Insurance in the child's name
Purchasing an insurance policy in the child's name is a very common mistake made by grandparents (or grandchild). Remember that life insurance is a financial tool that can protect a family from losing future income or existing liabilities.
The insurance term is shorter than the liability term
People tend to buy insurance with a shorter term than its liability to reduce premiums. Life insurance should ideally cover risks encountered during the policyholder's life journey.
Inaccurate disclosures
Another grave mistake people make with life insurance is misrepresenting information in the policy, such as information about health or habits. While this may not appear a big deal, such errors can render the policy null and void if discovered later.
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