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Common life insurance mistakes to avoid



Mistake #4 – Lying on your application

It may be tempting to leave out certain facts about your health, lifestyle or family history in order to get lower premiums, but don’t. More than likely, the insurance company will discover the hidden information anyway.

When you apply for life insurance, insurance companies can verify your information through various sources, such as:

  • Your prescription history
  • Your journals
  • Your car registration

When you apply for life insurance, you give the insurance company your medical and lifestyle history from your perspective. But they will also review your health history from your doctor’s offices and the results of your life insurance medical exam, if you have to get one.

If the insurance company notices any discrepancies between their results and what you have stated on your application, they may deny you coverage if they believe you intentionally withheld information.

If you get away with lying about your application and it is approved, know that the insurance company has the right to investigate and deny death benefit claims for the first two years that the policy is active. If it is discovered that you lied to get your insurance, the insurance company may reduce or even completely deny any payout to your beneficiaries.

The best thing you can do when applying for life insurance is to be honest and assume that everything you put on your application will be investigated.

Mistake #5 – Not buying enough coverage

As mentioned earlier, $1

00,000 from group life insurance may seem like a lot of money at first glance, but when you factor in the cost of your mortgage, child-rearing expenses, credit card debt, retirement savings, and your children’s education, it suddenly isn’t very much at all.

Buy as much life insurance as you can comfortably afford.

If you need help determining the right amount of life insurance, check out our life insurance calculator. It’s easy to use and helps you make sure you’re buying the right amount of life insurance.

” Calculate: Life insurance needs calculators

Mistake # 6 – Improper Beneficiary Appearance

You might think it’s easy to assign someone to receive life insurance money after you die, but choosing beneficiaries can be a little more difficult than that. The whole reason for owning life insurance is so that your income is replaced for the benefit of your beneficiaries. If it’s not set up correctly, it can be a mess.

Do not designate minor children or persons with disabilities as beneficiaries.

If you name your minor child as the beneficiary and you die while they are still minors, a court proceeding will take place to determine what happens to the death benefit. Probate can take a long time and cost a lot of money.

Persons with disabilities or special needs must also not be listed as beneficiaries. Doing so could negatively affect their government benefits such as Medicaid and SSI.

Make sure that the insured, the beneficiary and the owner are not three different people. For example, if you own insurance for your spouse, don’t name a child as a beneficiary. This will be seen as giving your child the death benefit on your spouse’s death and then the government will want their reduction in the form of a gift tax.

Be specific about your beneficiaries when you list them on your life insurance policy. In a 2014 court case, a woman named Edna Jean Turgeon listed six beneficiaries, one of whom she called her “unborn grandchild.”

The situation was that her daughter, one of her beneficiaries, was pregnant and she wanted to include this unborn child as a beneficiary. The problem was that when Edna died, her daughter had given birth to not just one, but three children.

Edna never took the time to update her beneficiaries, and the court ruled that because Edna used the language “grandchild” instead of “grandchild,” only the firstborn of the three additional grandchildren was entitled to the death benefit.

Mistake #7 – Not reviewing and updating your policy

Life insurance is not a set-it-and-forget-it financial product. Ideally, you want to review your policy every two years and every time a significant event occurs in your life, such as marriage, divorce, birth, job change, home purchase, etc.

Review and update your beneficiaries if necessary. Also consider whether you still have enough coverage.

Reviewing and updating your policy is essential to ensure it is still set up to your liking.

Mistake #8 – Not shopping around

No two life insurance companies are the same. They guarantee applicants a little differently. Depending on your individual risk factors, one company’s interest rates may be twice as high as another company’s.

To ensure you get the best price, work with an independent life insurance broker, like Quotacy. Brokers have agreements with many different insurance companies and can shop your case to find the best price.

When you apply for life insurance with Quotacy, one of our agents will review your application before we officially send it to the insurance company you selected online. If another insurance company offers you a better price, we will let you know.

Even if you have a medical condition and you think you can’t get coverage, try applying. Don’t assume you’re a lost cause.

If traditional life insurance is not a viable option, your agent may have other products available such as guaranteed issue life insurance or accident insurance.

Long story short, life insurance is a great product, but having an expert in your corner will help you get the coverage you need at an affordable price. Get started by getting a free, anonymous (no contact information required) life insurance quote today.


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