Life Insurance

We all know that insurance is an effective form of protection against the financial challenges that may arise due to permanent disability, critical illness or premature death. It has become a crucial part of people’s financial plan. When it comes to buying a life insurance policy, you will find different insurance companies offering different types of policies, with different costs and benefits.

If you are planning to buy an insurance policy, then here are some major mistakes that you should avoid to take maximum advantage of your life insurance.

Buying the Wrong Type of Policy

One common mistake in choosing life insurance is selecting the wrong type of policy. Generally, life insurance policies can be categorized as either term or permanent. Term policies provide a predetermined death benefit and remain in force for a specific period. You can choose to purchase term life insurance for the number of years of your choosing. On the other hand, permanent life insurance can provide coverage for your entire life. There are different types of permanent insurance policies including whole life, variable life, and universal life, each with their own features. A whole life insurance policy allows you to accumulate cash value that can be utilized later, while universal and variable life policies are linked to different investment vehicles.

Before selecting between permanent and term life insurance, it’s important to determine what you want from the policy and compare the costs of each option. For instance, if you only need coverage for a specific time period to cover mortgage or credit card payments in case of your spouse’s death, then a term policy may be more suitable.

However, if you are interested in a policy that can earn returns on your investment, then a permanent policy might be worth considering, even if it comes with a higher premium.

If you feel overwhelmed by the options and unsure of how a life insurance policy fits into your broader financial objectives, consider consulting with a Singapore financial advisor. This can help you identify your priorities, such as planning for retirement or financing a child’s college education and incorporate these goals into a life insurance plan that can safeguard your family’s financial if there is an unexpected event.

Not Buying Sufficient Coverage

When selecting a life insurance policy, determining the appropriate death benefit amount is crucial. Randomly choosing a figure is not recommended as this could result in a shortfall for your beneficiaries in the future. To calculate the appropriate coverage, you should consider various factors such as age, health, life expectancy, income, debts, and assets. If you have significant savings and minimal debts, you may not require as much coverage. Conversely, if you have young children and a non-working spouse, you’ll need sufficient insurance to provide for them financially over the long-term. It’s important not to underestimate the value of a non-working spouse, as their death could lead to new expenses like childcare or housekeeping help that life insurance can help cover.

Not Choosing the Riders

Riders, these are add-ons and provide you with additional payments when a particular event happens. For instance, a critical illness will provide you with an additional payout if you are diagnosed with a serious illness. You can choose different types of riders such as early cancer cover, critical illness cover and total and permanent disability cover.

Always be sure to read the fine print before you add a rider to a life insurance policy. If needed, sit down with an insurance advisor to evaluate the benefits of riders and then buy the one best suited to you and your family.

Buying On Impulse

Purchasing life insurance is an important decision that should not be made on impulse. While it may be tempting to buy a policy quickly without considering the implications, there are several reasons why this is not a wise choice.

Firstly, life insurance policies are designed to provide financial security to your loved ones in the event of your death. This means that the policy should be tailored to your individual needs and circumstances. If you buy a policy on impulse, you may not have had time to consider how much coverage you need, what type of policy is best for you, or how much you can afford to pay in premiums. As a result, you may end up with a policy that is inadequate or too expensive.

Secondly, buying a life insurance policy on impulse means that you may not have had time to research different insurers and policies. It’s important to compare policies from different providers to ensure that you are getting the best value for your money. By taking the time to research your options, you can find a policy that offers the right level of coverage at a price that you can afford.

Another reason why you should not buy a life insurance policy on impulse is that you may not have had time to consider the long-term implications of the policy. Life insurance policies are typically long-term commitments, and you may be required to pay premiums for many years (depending on the policy). If you buy a policy on impulse, you may not have fully considered whether you can afford to pay the premiums over the long term or whether your circumstances may change in the future.

Not asking for help

Speaking to a financial advisor when buying life insurance can be a wise decision because life insurance is a complex financial product that can have long-term implications for you and your loved ones. A financial advisor can help you navigate the various types of life insurance policies and select the one that best fits your unique financial situation and goals.

Assessing your needs: A financial advisor can help you assess your current and future financial needs and determine how much life insurance coverage you require to adequately protect your loved ones in the event of your untimely death.

Selecting the right policy: There are several types of life insurance policies available, including term life, whole life, and universal life insurance. Each policy has its unique features and benefits, and a financial advisor can help you select the policy that best fits your needs.

Determining affordability: A financial advisor can help you determine how much you can afford to pay for life insurance premiums while also ensuring that you have adequate coverage.

Providing ongoing support: Life insurance needs can change over time as your financial situation changes. A financial advisor can provide ongoing support and guidance to ensure that your life insurance coverage remains appropriate for your needs.

Overall, speaking to a financial advisor when buying life insurance can help you make informed decisions that align with your long-term financial goals and protect your loved ones in the event of your untimely death.

 

If you would like information on any of the above areas or any other area of financial planning, please contact.
Singapore Expat Advisory
Email: advice@singaporeexpatadvisory.com
Tel/Whatsapp +65 9432 8781
www.singaporeexpatadvisory.com

 

Singapore Expat Advisory is an agency for Promiseland Pte. Ltd and are authorised and regulated by the Monetary Authority of Singapore (MAS).
General Information Only This article should not be construed as an offer, solicitation of an offer, or a recommendation to transact in any products (including funds, stocks) mentioned herein. The information does not take into account the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a licensed financial adviser regarding the suitability of the investment. This article has not been reviewed by the MAS