Common mistakes people make when buying life insurance
It is important to assess your needs vis-a-vis your household spending
With the current pandemic, the importance of life insurance amongst the citizens and expats of the UAE has increased. However, buying life insurance is not always an easy job.
So when buying a good life insurance policy, here are some common yet major mistakes that you must aim to avoid:
Don’t know what to check for in T&C
The terms and conditions (T&C) section contains details that can influence the scope and limitations of your policy.
Apart from charges and fees, look specifically for exclusion clauses, policy holder rights, and procedure to apply for a claim, conditions when claims can be denied and most importantly, effects of death or disability.
In life insurance, an exclusion is a cause of death that releases the insurance firm from having to pay the death benefit to an insured person’s beneficiary. The only common exclusion in today’s policies is suicide.
Also, you should look at your premium levels and see whether these are guaranteed to remain the same for the duration of the policy, or whether the insurer can reassess them after a fixed period of time.
Being under-insured or over-insured
When you’re over-insured, you’re protected against more situations than you really need, and you have more coverage than you could ever use, which drives up premium.
Under insurance refers to being insured less than required. You need to update your policies over time.
Studies show that families shift to a more conservative spending after a member is deceased. Also, if you have other investments, then you may not need a very high coverage.
In reality, it is always better to estimate your family’s household spending by deducting any income your spouse is earning to come up with a more accurate prediction of how much extra income your family would need.
Not purchasing illness cover
A life insurance policy should not just be bought to offer financial aid in case of death. Instead, it should also be bought along with a ‘critical illness rider’.