It’s a tale as old as time itself; staring into the abyss and wondering what happens once the lights go out. It’s natural to be gripped by a certain fearful feeling when contemplating life’s biggest question, and then to sweep it under the carpet along with all the other dust we eventually become.
But as a survey of just over 2,000 adults reported in the Financial Times revealed, more than two thirds of the UK population either hasn’t purchased any life insurance (57 per cent) or doesn’t know whether they have or not (11 per cent).
This, it turns out, may be a rather big mistake, particularly for those who have large debts such as mortgages, and/or partners or children who are financially dependent on them. However, choosing a policy can be complicated – and mistakes may have serious consequences. With that in mind, here are some of the main mistakes to avoid when you buy life insurance.
Waiting Too Long
In the vast majority of cases, the younger you are when you take out your life insurance policy, the cheaper it will be. This is primarily because, at a young age, you’re also less likely to have medical conditions that will impact the cost of insurance or your eligibility for certain policies.
Of course, your circumstances are likely to change as you get older, so make sure that your chosen policy is still appropriate if you go on to buy a house, get married, or have a child. You can always switch to a better deal as and when you need to.
Read: 6 types of insurance your family might need
Lying On Your Application
Whilst we certainly wouldn’t want to make any assumptions about your levels of virtue, there are some people who are tempted to lie to insurers about medical issues and other factors that they think will drive up the cost of their policy. This is known as ‘non-disclosure’ within the insurance industry.
This is a big mistake. If and when you or your family make a claim, they will check your medical history and other details extremely carefully – and if they discover that you’ve withheld the truth, then it may well invalidate your policy.
The potential consequence of that is that your loved ones are left with nothing. Not only is this not worth the risk, but it also isn’t necessary. There are specific policies available for those with a medical problem that ensure you get the best cover at an affordable price regardless of your personal situation.
If you require additional information or want to compare quotes from leading insurers, insurance broker Reassured have created this comprehensive life insurance with pre-existing conditions guide.
Not Doing Thorough Research
Life insurance policies can be confusing, so it’s vital that you do your research properly when choosing one. Here are some top tips to help you out:
- Don’t be tempted to simply opt for the cheapest policy, as this might not leave you and your dependents with enough cover
- Shop around and get quotes from multiple providers, then compare them closely to determine the best fit for you
- Consider your family’s financial situation carefully, so you can determine exactly what type of cover you require – and ensure that you don’t overpay for cover that isn’t necessary
- Read about the different types of life insurance policy that are out there (for example, whole life cover, decreasing term, increasing term and level term) so that you can make an informed decision about which will best suit your circumstances
- Get advice from a professional if you’re still confused about which option to go for
Types Of Insurance Policies
Finally, let’s look a little at the most common types of life insurance policy to consider:
- Term life insurance – This is the most popular type of life insurance and will provide cover for a fixed period. A lot of the time, policyholders will reduce their premiums by agreeing to decrease term life insurance. However, the potential payout will also come down, typically in line with a repayment mortgage.
- Whole life insurance – This results in a payout when you die. Even so, this reassuring security comes at a price and you’ll be paying premiums late into life.
- Convertible term insurance – This offers a fixed term policy that can be changed to a whole of life or endowment policy at the end of term without having to provide additional medical evidence.
- Over 50s life insurance – This type of policy is designed for people aged-50-79 and doesn’t involve questions or an assessment of the applicant’s medical health or history.
The Bottom Line
This might seem like hard work but putting in the effort to get the right life insurance policy is well worth it. It will give you peace of mind to know that the people you love will be financially stable after you’re gone, whether that’s enabling your partner to pay off the mortgage, covering the kids’ tuition fees, or simply ensuring that your funeral costs are handled. And you can’t put a price on peace of mind, after all.