Friday, March 25, 2011

Mistakes To Avoid When Getting Life Insurance

Most of us know what life insurance is. You pay a monthly or yearly premium and in return the insurance company will pay your beneficiary a lump sum payment when you die. There are a number of different types of policies, and they cover a number of situations. Many of us will make the same mistakes when we purchase. This article is a look at some common mistakes and other issues to avoid.

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Photo: Explore The Bruce

  • Getting from your bank. Many banks have other insurance services above and beyond their usual lending and depositing services. When you seek to get a mortgage for your new home, or when you are refinancing, your bank will probably offer you some of these services. Because we are in need of financial assistance, we are more often more likely to buy these additional financial services at this time. The bank is trying to make additional earnings from you, and this is not necessarily in your interest. Getting insurance products like income protection insurance and life insurance are best sought directly from a more specialist insurance company. Your bank is only acting as an agent, and is not the company actually providing you with the insurance. A specialist adviser will have a better understanding of the products available.
  • Not making the professional work hard enough. Many people will not ask their professional enough questions, because they feel they will be obliged. You should never feel this is the case. Like any business, insurance professionals are in a very competitive market. You should not be afraid to get them to work hard for your money and explaining all the options to you. They earn their money through a commission structure.
  • Buying without underwriting. This is a very big mistake. Life insurance without underwriting is available at very high prices. Aggressive marketing in this area is often very convincing. Underwriters are normally very large and stable companies that have already stood the test of time. If your insurance does not have an underwriter, you never really know what might happen. This should always be avoided.
  • Through superannuation. Getting your life insurance through your superannuation fund, might seem like a good idea at the time. Again, you always must read the policy. Superannuation funded life insurance often leaves the beneficiary without the funds assumed.
  • Buying separately. As with just about everything we buy, when we buy more at once, we will get a better deal. You should look to put as many of your insurances together to maximise your investment. If you have a number of policies with a number of companies, you will be paying a lot more in total.
  • Non-disclosure of pre-existing conditions. Some people may fear they cannot be insured if they disclose a pre-existing medical condition. Some life insurances will not cover for them, and others will. Non-disclosure of your pre-existing medical conditions is a breach of your contract. This will end in your losing all your payments and no benefit being paid. A very risky business to even consider. To cover a pre-existing medical condition you might need to make higher payments or fit certain requirements. We are all going to die one day.
When buying any insurance, you must always take the time to carefully read the policy. This is non-negotiable. Many people will only look at the table of benefits when purchasing.

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