Most of the people do not think that it’s important to talk about their life insurance policy and they do not realize that it may turn up into a financial nightmare in case of a serious tragedy. In the recent time, it is observed that many people tend to cancel their policies during any financial downtime, like recession, without even knowing the drastic effects of this mistake. We are going to discuss some of the most common mistakes that should be considered before buying or considering a new life insurance.
Considering the policy to be sufficient
Most of the people do not consider an insurance policy as a source of income for their family in case of their death, and instead their only concern is that the policy should cover bills and funeral expenses. They believe that it is unnecessary to waste money on purchasing an insurance plan because it is expensive. One should make sure that the policy is enough to cover the expenses of his family and then purchase it accordingly.
Old Measures of calculating the policy
Most of the people rely on an old rule of policy, “Seven times the income” for getting a policy. But it is not a useful measure as the family needs and situations differ from one person to another. A person with five kids will need much more insurance as compared to a person living alone in his apartment. So the ideal approach is to consider the fact that how much money would be required to support your children after your death?
Avoiding Long Term thinking
Generally people lose track of the time for which their policy should support their children and family in their expenses. Consider an example, if you have a child aging 5 years then a policy that will cover his expenses till 15 years will be enough for you. So it is important to consider the period of the term coverage.
Ignoring Non-monetary income
It is very common that people do not consider the amount of income they will need for different expenses like job benefits, health insurance and retirement plan offered by your employer. So your life insurance should cover all of these expenses.
Not updating your policy
In case of major changes in your lifestyle, like the birth of a new baby, an illness or a new expense, it is important to make an upgrade in your life insurance policy. Therefore, it is very important to consult Your Personal Financial Mentor when you purchase an insurance plan because he will help you avoid all the possible mistakes and will assist you in making wise decisions. Moreover, he will keep track of your financial activities and will notify you when you need to upgrade your insurance policy.