If you’re worried about your loved ones’ financial security after you pass away, life insurance can provide valuable protection. However, it’s important to avoid several common mistakes both before and after you sign your policy.
We’ve compiled a list of key pitfalls to avoid. Here’s 10 of them. Let’s dive in!
Mistake #1: Thinking you are too young to think about death
Many people believe they’re too young to consider life insurance but getting coverage while you’re still young and healthy can be beneficial. It allows you to secure a lower premium rate. You can start with a modest budget and adjust your coverage over time as your needs and financial situation evolve.
Mistake #2: Thinking your health condition prevents you from being insured
If you have health concerns, you might worry that life insurance is out of reach. However, insurers have different health requirements, and some may offer coverage even if you have pre-existing conditions. To find a policy that fits your specific situation, it may be wise to work with an insurance broker who can help you explore various options.
Mistake #3: Relying solely on your employer’s group insurance
While having group insurance through your employer is advantageous, it usually offers basic, one-size-fits-all coverage that may not be tailored to your specific needs. Additionally, this coverage typically ends if you leave your job. Therefore, it’s wise to consider it as complementary coverage rather than your primary coverage.
Mistake #4: Purchasing insurance without evaluating your needs
Choosing the right life insurance policy requires a thorough assessment of your personal situation, including your age, health, and family situation. It’s important to determine whether term life insurance or permanent life insurance, with or without an investment component, best meets your needs. To make an informed decision, ask yourself the following questions:
- Do you want to cover expenses related to your death?
- Are you looking to protect your family from ongoing debts?
- When will these debts be paid off?
- Do you want to create an inheritance for your beneficiaries?
Reflecting on these factors will help you select a policy that aligns with your goals and provides the right level of protection.
Mistake #5: Underestimating the required coverage amount
When choosing life insurance, it’s essential to accurately determine how much coverage your beneficiaries will need. This amount should be sufficient to ensure their financial security and cover all relevant expenses. Consider factors such as outstanding loans, lost income, daily living expenses, and future costs like your children’s education.
To guide you in determining the right coverage amount, you can use the calculator tool available on the Government of Canada’s website.
Mistake #6: Choosing insurance without a medical evaluation
While some insurance policies don’t require a medical evaluation, they often come with higher costs and limited coverage. These policies are typically designed for individuals with health issues or lower insurability.
Unless you’ve been declined by other insurers or have specific health concerns, it’s generally better to undergo a medical evaluation. This can help you obtain a more affordable policy with broader coverage and better terms.
Mistake #7: Providing false information to your insurer
Some people might be tempted to provide false information about their health status or lifestyle habits, such as tobacco use, alcohol consumption, or drug use, to lower their premium. However, this can be risky.
If an insurer uncovers any fraud after the insured’s death, they may refuse to pay out the benefit to the beneficiaries. To ensure your coverage remains valid and your loved ones are protected, it’s important to provide accurate and honest information on your application.
Mistake #8: Failing to compare different insurance options
Life insurance products differ widely in terms of coverage and cost, thus why it’s important to shop around and compare offers from various insurers. Use online tools and consider consulting an insurance broker to explore multiple options and find the best policy for your needs and budget.
This approach helps ensure you get the most suitable coverage at the best price. Additionally, choose an insurer that is a member of the Autorité des Marchés Financiers (AMF) for added security and peace of mind.
Mistake #9: Neglecting to reevaluate your needs throughout your life
Life circumstances evolve, and so should your life insurance policy. Changes such as shifts in debt levels, whether your children are still dependent, or other significant life events can impact your coverage needs.
If you have a term policy, you may need to extend the coverage period or adjust the benefit amount to reflect your current situation. Regularly reviewing and updating your policy ensures it remains aligned with your evolving needs and provides adequate protection for your loved ones.
Mistake #10: Failing to update your beneficiaries
Your list of beneficiaries should be updates to reflect significant life changes such as marriage, divorce, births, or deaths. It’s important to ensure that the individuals designated to receive your life insurance benefits are those you still wish to support financially.
Regularly reviewing and updating your beneficiary list helps ensure your policy aligns with your current wishes and circumstances, preventing potential issues and conflicts in the future.
One last thing to avoid at all costs
Having reviewed the common mistakes to avoid when selecting and maintaining life insurance, there’s one final crucial point: never miss a premium payment.
Missing a premium payment can lead to serious consequences, including the potential loss of your coverage and benefits. To ensure your policy remains active and provides the protection you need, make timely payment and keep track of your premium due dates.
Are you looking for a life insurance policy?
XpertSource.com can help you find a life insurance policy that fits you. When you tell us about your project, we put you in touch with qualified resources for free. Simply fill out our form (it only takes a few minutes) and we will connect you with professionals.
