Arranging life insurance is a little more involved than arranging car insurance – however, it is a single-time activity that can have a lot of impact on your family’s future health and happiness. There are a few simple steps to getting your life cover right – calculate your benefit amount, get quotes, look at the PDS and insurance contract and select your insurer … and then simply pay your premium! However, there are some common assumptions that people make that can result in a far from ideal result … today we check out 6 more of those common mistakes with life policies.
Life insurance mistake 1 – Not insuring or undervaluing a non-working spouse
Many people assume there is no point insuring the life of someone who doesn’t contribute financially to the household … forgetting that non-working spouses actually contribute a great deal! Life cover for a non-working spouse should cover childcare bills, the cost of hired household help, take away meals, gardening etc. If it doesn’t, the surviving partner will have stress levels through the roof while grieving and will eventually need to cut back their working hours to better cope.
Life insurance mistake 2 – Glossing over the question of stepped or level premiums
Many people choose stepped premiums for their life policy, because level premiums are far too expensive in the early years while you still have children and a mortgage. However, you need to remember that your policy will eventually become a sizeable bill, just at the time when you’ve retired and have little money, but are closest to collecting the benefit.
Life insurance mistake 3 – ‘Satisficing’ with your life insurance policy
Some decisions in life work best for ‘satisficers’ – those who go with the first available decent option. However, life cover should be a lifetime commitment! It’s worth spending the time to review a wide selection of companies, not just the first two.