Waiting too long
We think of life insurance as something that we might need ‘one day’– maybe when we’re retired or nearing retirement. So a lot of us don’t consider buying it while we’re still working. This is the number one mistake, as one of the main factors influencing cost is your age. It’s a no brainer that the older you are when you take out the insurance, the higher the cost is likely to be.
Think about what you have to protect
The reality is that disaster can strike at any time, and if you have assets such as property, or a family that you would like to be looked after in case of your death, life insurance could help. Even the most diligent can fall into this trap – but it’s worth remembering that unless you review your policy and your asset values on a regular basis, you may be undervaluing your lifestyle or assets – for those you want to protect. As a matter of course, it’s worth reviewing your life insurance as your life changes. Events such as buying a house or the arrival of children or your first grandchild are all life milestones and are key trigger points for reviewing your cover.
Check what you’ll be covered for
In this time of recession, people look to cut back wherever they can and lowering insurance premiums, or choosing the lowest level of cover when buying a product for the first time, can seem like a good way to do this.
"If you opt to pay the smallest premium possible on your life insurance, you might not be getting the best protection for you."
Some people genuinely don’t need a high level of cover, but if you opt to pay the smallest premium possible on your life insurance, you might not be getting the best protection for you. There are life insurance calculators online to work out how much cover you would need to cover any debts and assets you have, and once you have this figured out, you should make sure the policy you’re buying will cover you for this amount.
Relying on joint cover or only buying cover for one partner
It might seem sensible to have a joint life insurance policy with your partner – especially if you have a mortgage together and your other finances are combined. Similarly, it seems to make sense to only insure the partner that works, if one of you stays at home, as there’s only one income to protect – which is all well and good, so long as you have estimated how much you need to live if you do lose that income and also, that you have allowed for additional expenses that may be incurred due to ill health during this period.
Consider the impact
Joint cover only pays out once. It will pay out when one of you passes away, but if the other partner then wants to continue to have cover in order to protect any dependents or assets after their own death, they will have to take out a brand new policy. And even if there’s no direct impact on family income if a non-working partner passes away, there may be increased childcare costs or the working partner could have to decrease their hours to accommodate family responsibilities. In these cases, a life insurance pay out could help ease the financial strain.
When you’re looking for any kind of insurance product – from over 50s life cover to car insurance – the main thing to remember is that it’s vital to do thorough research, so you don’t fall foul of the mistakes listed above, or any other pitfalls, along the way.
Note: Whilst we take care to ensure Hub content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions. OneFamily do not provide advice so it may be worth speaking to an independent financial adviser about your own circumstances.