Life Insurance policies are considered to be the crucial component of your financial plan. Unfortunately, lots of misunderstandings about the life insurance policies exist today amongst the policy buyers, especially due to the way the agents are selling these life insurance policies. So, if you are planning to buy Life Insurance Plans from an insurance company Glendale AZ then there are few common life insurance mistakes which you need to avoid while buying these policies for you.
Undervaluing the Insurance Requirements
Today, a large group of people usually prefer to choose the sum assured or policy coverage based on the plans the agents want to sell or according to the premiums they can afford to pay. However, theseare the most common life insurance mistake. Remember, the insurance requirements are the function of your financial condition, and it has nothing to do with what types of products are available. The insurance buyers usually use the basic concept while buying insurance plans, like choosing policies with coverage ranging from nine to ten times their annual income. Financial advisors usually suggest that policies with coverage of 10 times your annual income is sufficient as it offers your family tenyears worth income in your absence. It is not correct in all situations. For instance, if you have a mortgage or home loan for 20 years, how will your family pay off the monthly installments after ten years. Thereby most of the loan will remain outstanding. So, there are certain factors to consider while deciding the insurance coverage.
- Sum assured should be sufficient to repay all the debts of the policyholder
- After the debts, the sum assured must have extra funds to create monthly income to cover the living and daily expenses of the dependents after the policy holder die, factoring the inflation
- After monthly income and debt repayment, the sum assured amount must be sufficient to cover future obligations of policyholders like children marriage and their higher education
Financial planners always recommend the Term Insurance as it is the purest form of insurance and a straightforward protection policy.