Life insurance is the greatest gift that you can give your family. For a watertight life insurance policy that delivers on its promises, learn from our list of 5 common life insurance mistakes.
Mistake 1: Not buying enough cover
When you purchase your life insurance policy take some time to calculate how much life cover your family will need in the event of your death.
The1Lifedirect life insurance calculator will help you make an initial assessment of how much cover you need. Basically your life insurance payout should cover:
- Your funeral expenses
- The cost of settling your estate
- Your outstanding debt
- Education costs
- The cost of supporting your household for 20 years, including food, electricity bills, rates and taxes, short-term insurance, domestic help, medical aid etc
Mistake 2: Withholding Information When You Apply for Cover
You must be completely honest when you apply for life insurance. If you provider finds out that you withheld information any claims your family make might be rejected or reduced.
Mistake 3: Not buying insurance for a stay-at-home mom or dad
Just because your partner or spouse is not a breadwinner does not mean they do not need life cover. Here’s why:
- Consider the cost of paying for all they work they do for the family in the event of their death: cleaning, cooking, fetching and carrying, helping with homework and looking after sick kids.
- Chances are they were planning on returning to work one day and contributing towards retirement savings, education costs etc. How would your family copy without the additional future income?
Mistake 4: Not nominating beneficiaries/nominating your estate as a beneficiary
Make sure that you nominate a beneficiary to your policy. In the absence of a beneficiary 1Lifedirect will pay your cover amount into your estate, which can take months or even years to settle.
Another word of advice concerns minor beneficiaries. If your beneficiary is underage, 1Lifedirect will pay your funds into a trust. We recommend that you set up this trust yourself and stipulate how and when the funds should be transferred to the minor. If you do not set up the estate yourself the family of the minor has to do it. This takes time and costs money, delaying the payment of funds to your beneficiary.
Mistake 5: Not reviewing your policy regularly
Review your life insurance policy regularly for two reasons:
- To ensure you have enough cover – for example a new baby or additional debt could mean that you need to increase your cover amount.
- To keep your list of beneficiaries up to date – for example if you recently got married or divorced.