Three Mistakes to Avoid When Buying a Life Insurance Policy
Life insurance is a wise investment. It will help your loved ones pay for your burial fees, and help reduce the stress of your death. And buying life insurance is usually easy. Simply choose the type of policy you want, the amount of coverage, and then start paying the premiums. However, there are some situations you want to avoid when buying a policy.
Three Mistakes to Avoid
1. Designate Your Estate as the Beneficiary
When you complete your life insurance application, name a specific person as your beneficiary. Some people do not name a specific person. When that happens, the money goes to the family or the estate. That means the insurance company cannot pay a specific person and the money will probably have to go through probate. This will delay the money getting to your heirs.
2. Name a Beneficiary Younger than 18-Years of Age
Naming a minor child as the beneficiary is not a good idea. If you die before the child becomes an adult, then the proceeds must be controlled by a court-appointed guardian. There is no guarantee the guardian will not misuse the funds. One way to avoid this is to create a trust and naming the child as the beneficiary. You can then name the trust as the beneficiary of the insurance policy.
3. Never Reviewing Your Policy
Major life events, like the birth of a child, marriage or divorce requires a review of an insurance policy. There are cases where a person has divorced and remarried, but failed to change the beneficiary on the life insurance. In this situation, the ex-spouse listed on the insurance will receive the benefit.