Four Most Common Life Insurance Mistakes and How to Avoid Them
Life insurance holds an important value in our lives as it acts as a retainer in case of any misfortune. It is essential for you and your family. You might make some mistakes while committing to life insurance, which can cause serious monetary issues. You can avoid these problems if you get proper guidance. In this blog, we will discuss the common mistakes people are prone to make while getting life insurance and how they should address them.
Nauroth & Associates Insurance Brokers Ltd has been in the insurance business for 25 years. Our insurance agents are excellent at building a comfortable rapport to help our customers feel at ease while doing business with us. Our products include auto insurance,life insurance, home insurance, commercial insurance, travel medical insurance and tenants insurance.
What Mistakes Am I Prone to Make and How Should I Deal With Them?
Have a look at the common mistakes people make while getting life insurance and their solutions.
1. You haven’t checked your policies in the past three or four years
Life keeps changing, but you might forget to update your beneficiary on life insurance that you got five or ten years ago. Most of the time, former spouses end up getting all the money from the policies because they are named as beneficiaries. If your children are born after you got the policy, they will not get any proceeds from it whatsoever. To avoid this, you need to check the policies that you have purchased and update them according to the current circumstances in your personal life. The beneficiaries need to be updated so that you know who will get the amount. Get the insurance company to send you in writing the current policies in force and the list of beneficiaries listed for your policy and the premium they’re going to receive. This will make the process more transparent and more straightforward.
2. The amount for your personal coverage does not fit the financial security goals of your family
You have to make a summation of the approximate amount required for the sustenance of your family. You need to do something about your current policy if it isn't enough to cover your family's basic requirements. There are factors such as taxes and debt clearance (if any) that need to be considered. Often it is observed that the insurance coverage isn't sufficient, and the family goes through difficult times to survive. To avoid that, sit down with your insurance agent, discuss the financial needs of your family and seek counsel about the amount you should commit to.
3. You solely own the insurance
If you own a property for which you need to pay federal estate taxes, purchasing insurance in your name will be of no use. It might lead to federal estate tax inclusion, which can result in state or federal estate tax liability. To avoid this, you can get an adult beneficiary you trust to own insurance and be the recipient of it under your name. Or else you can build trust for the beneficiaries. If you legally don’t own the insurance, it won’t have any claims to your estate.
4. You have signed up for the wrong type of life insurance
If you have selected short-term life insurance and won’t benefit you when you need it the most, there’s no point in having it. Consult with an insurance broker before purchasing insurance and seek expert advice. Nowadays, there are many better policies available that will cover your new requirements. You can get your old policy replaced for a better new one, which provides better coverage. A better alternative will be to keep your current policy if it allows for five to six percent borrowing for paying dividends that are equal to the premiums and get a brand new policy for better coverage.
Contact Nauroth & Associates Insurance Brokers Ltd to get reliable life insurance today.