Life insurance is a very important financial decision in your life. However, most insurance companies either tend to play it up or hide certain facts from you. All this is done so that they remain profitable. This doesn’t necessarily mean that insurance companies are defrauding you. It is just that they are not as up front with you as they should be. Here are some reasons.
Not Everyone Needs Life Insurance
Your insurance agent might want you to get life insurance for everyone in the household, your kids included. However, the fact is that anyone who doesn’t have dependents looking towards them for financial support is wasting money on life insurance.
Insurance Agents Have Skewed Views
The amount of commission received for life insurance providers is high. Therefore, more often than not, they tend to be biased in the services they want you to opt for. They are not necessarily thinking the best for you but the best for themselves. The more commission they get, the happier they are. Therefore always have your radar up when talking with an insurance agent. Else they might goad you into signing a policy that you shouldn’t have.
Life Assurance Isn’t Great
Most people think that life assurance is better than life insurance because they have the certainty of a payout. What they don’t consider is that life assurance is inherently flawed in the favor of the insurance company. They charge higher premiums for this service and also make the final payout variable. The variability comes from the fact that a percentage of the premiums is invested in investment funds. Therefore the final payout you get would reflect the performance of these funds over the years.
Joint Policies Aren’t Better
Many couples prefer to get a joint policy instead of separate policies. This is because these policies tend to be slightly cheaper and are less of a hassle to maintain. However, insurance companies benefit the most form such a scenario because a joint policy only has a single payout. The widowed spouse would likely have to register for a more expensive single policy later in their life.
Therefore it is always advisable for couples to get two separate policies instead of a single, shared one. If they still want a joint policy then opt for separate terms and payouts.
Reviewable Premiums Are Not Great
There are two types of premiums on offer: reviewable and guaranteed. Guaranteed premiums tend to stay the same throughout the course of a term life insurance policy. Reviewable premiums, on the other hand, tend to seem attractively low at first. But then after they are subject to review after 5 or 10 years they are more than likely to jump up. Therefore you stand to gain a lot if you are still young and healthy and choose a life insurance plan with a guaranteed premium.
Read the Fine Print
Like most insurance policies, the devil lies in the fine print. All life insurance policies have exclusion clauses that render your family incapable of getting the assured amount. These include the likes of accident outside the EU, alcohol/drug abuse and partaking in risky activities. Therefore always try to read and understand the policy completely before signing on that dotted line.