Avoid These Common Mistakes When Buying Life Insurance

It’s hard to imagine not being able to support the loved ones that depend on you. The lives and livelihood of your loved ones will be severely affected by your death. If you leave behind a large debt, the situation will worsen. It is possible that your loved one’s will not be able to hold onto the assets you left behind, and that the late-payment charges could become a nightmare. These are the reasons why people buy life insurance. It is important to choose the right insurance policy, so that you do not over- or under-insure. People often pay too much for the coverage they receive. Here are some common mistakes to avoid when buying a life policy:

Do you have difficulty understanding life insurance policies?

The world is full of “ifs” and “buts”. We never know what will happen in the next few minutes. You need a Life Insurance Plan if your child, partner in life or parents depend on you. Term insurance can be considered the most basic and basic insurance product. The purpose of term insurance is to provide the cover amount (the sum assured) in the event that the policyholder dies. A term plan covers risk for a specified period (policy duration/term). The death benefit is paid if the insured passes away during the specified time period and the policy is active (or in force).

There are 5 different types of life assurance policies:

  • Life insurance plan
  • Investment linked plan
  • Plan for a whole life participation
  • Reduce your term life insurance plan
  • Whole Life Non-Participating Plan

The premiums and components of different policies may differ. You may end up paying too much for features you don’t even need if you purchase the wrong policy. First, you must understand the differences between different plans and then select the right plan. You can then compare different policies from different banks after you’ve chosen your plan.

Why you should buy insurance

One of the main reasons to buy life insurance is to protect your loved ones from death, critical illness and total and permanent disabilities. One of the other reasons to purchase a life plan is to save money, invest and reduce taxes.

Ask yourself why you want to buy a policy of life insurance. It can be for multiple reasons. You must then customize your policy to meet your goals. You do not need to buy a participating whole-life policy if you want protection. 80% of your premiums will go toward the saving component.

There is a great deal of planning and assessment of risk involved in selecting the best plan for life insurance. Your financial advisor or agent will ask you:

  1. Calculate your life expectancy by adding up all of your income, including loans and other liabilities. The key to buying life insurance is your human life value.
  2. You are willing to risk your life?
  3. What are your life goals? Are they planning your child’s education or marriage, or even your own retirement?
  4. Your investment timeframe viz. Your investment timeframe viz.

Based on your inputs, the financial planner will choose the best policy for life insurance that meets your needs.

You may think that life insurance is expensive and complex

About 56% of Malaysians have life insurance. The majority of people say that life insurance is complicated and they can’t afford it. Some people are sceptical because they’ve been misled before by insurance agents.

You do not have to buy insurance through an agent. It is not necessary to feel compelled to buy a life policy. You should only purchase it if it will protect you and your family or if it will save you money. Online life insurance is available without commission costs.

You may think that a policy with a higher premium or one with a lower rate is better

A good policy does not always mean paying higher premiums. It is not possible to choose a policy with a lower price and still get the same coverage. Choose a policy that is right for you. Compare the costs and benefits of different policies to make an informed choice.

You may not have dependents, but you still need insurance

The majority of policy claims are made for critical illness or disability. In the event of critical illness or disability, you will need to replace lost income. You may not be in debt just because you don’t have any dependents. In the event that you die, your parents will be responsible for paying off your debt.

You think you need insurance for your entire life

It is for this reason that there is an over-insurance of old age. You don’t require insurance if your main goal is to maintain the lifestyle of a loved one. If you don’t have any debts, then you do not need life insurance.

Over-insuring or under-insuring

In Malaysia, the average amount of coverage is less than RM50,000. A majority of people are underinsured when the cost of life is taken into account. A large group of people are also over-insured. The majority of people over-insure themselves by buying multiple insurance policies in order to save money and invest.

What is the best insurance plan?

Individuals should look for unique and innovative features when choosing an insurer or insurance plan.

These features include:

  1. Choose insurance plans with a wide range of options, whether it’s in the form of riders or plans/options for ULIPs. You can choose from a wider selection of options to find the best plan/option that suits your risk profile and investment objectives.
  2. Life insurance should be easy to buy and convenient. Choose an easier-to-purchase insurance plan, such as one that can be purchased online.
  3. Insurance is not free. There are costs and charges associated with life insurance, fund management, distribution, administration and agency. Choose the insurance plan with the lowest cost, as this will result in lower premiums. In the case of ULIPs lower costs will result in higher returns over time. Similarly, some companies offer reduced premium rates for term plans to non-smokers.
  4. Choose insurance plans with more flexibility in terms of the term. It is better to choose an insurance plan that has a minimum age of entry and a maximum age of maturity. This will ensure you have coverage for a long time.

If you want to buy a life policy, make sure the death benefit is between 5 and 10 times your income. Your dependents will be financially secure for several years following your death. Avoid these mistakes when taking out an insurance.

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