One of the most important financial planning moves you can make is to purchase life insurance. Life insurance is about providing for your family after you're gone. It's about peace of mind and making sure your family is cared for.
So many people put off buying life insurance or don't purchase enough coverage. In fact, my research shows that 95% of Tanzanians in America have no life insurance at all.
Life insurance ensures that, when you die, your beneficiaries will have the financial resources in place to protect their future income and pay for immediate (i.e. funeral and burial expenses) and future financial obligations. Life insurance proceeds are paid quickly to the beneficiary (ies) without any delay in probate, and they are income tax-free.
Without life insurance, your surviving family members could become financially burdened or even devastated at the time of your death.
Survivors could possibly lose the house, children may not be able to attend college, a family business could be lost, monthly family bills could go unpaid, the family could be forced to increase their debt burden to pay for things like last illness expenses, funeral and burial costs, or any number of other possible issues.
While living in United States as a Tanzanian Diasporan, I've seen a number of families devastated by not having or having inadequate life insurance. More Tanzanians need to be aware of the importance of life insurance, and I want to help educate them.
Buying life insurance is an important part of good financial planning, and you don't want to make a mistake -- your family's future could be at stake.
As you purchase life insurance, avoid these six mistakes:
1. Don't lie on your application.
One of the worst things you can do is lie on your life insurance application. It may be tempting to enhance your answers to get a better rate -- like "forgetting" to mention a medical condition. A lie can be the basis for a life insurance company to deny your claim. You could be putting your family's security at risk by lying on your life insurance application.
2. Don't wait to buy until you're older.
Older is not wiser in the life insurance market. Life insurance rates are based partially on age. Let's face it: The older you are, the closer you are to death.
3. Don't visit your doctor right before the insurance medical exam.
As tempting as it is to purchase life insurance that doesn't require a medical exam, those policies might not offer the coverage you need at a price you can afford. But it might not be in your best interest to see a doctor right before your medical exam from the insurance company. Realize this: If a problem arises at the appointment, the life insurance company will learn about it when it reviews your medical records. Shop around to see what's available; chances are, you will need a medical exam to get the best deal.
4. Don't purchase too little insurance.
One of the biggest ways to mess up your life insurance purchase is to get too little. Don't be one of the 50 million people in America who don't have adequate life insurance. That's a surefire way to ensure your family struggles after your death.
Rather than follow a rule of thumb like "buy eight times your salary," look at your individual situation. Consider your debts, as well as the income that your family is likely to lose from your passing. You want coverage that will pay off all your debt as well as provide income for your family. A life insurance calculator can help you pinpoint the right amount. www.bankrate.com/calculators/
5. Don't plan an exotic vacation.
Avoid planning vacations to exotic lands until well after your policy goes into effect. Some insurance companies want to know your travel plans. If you want to go on a whitewater adventure in South America or a safari to a country known for its diseases, you could run into trouble. And life insurance companies are especially wary of those who plan to live for long periods of time in countries experiencing political unrest or other dangers. Make those kinds of travel plans further down the road.
6. Don't have a casual smoke.
Thinking of lighting up a cigarette while out hanging with friends? Think twice if you have a life insurance medical exam on the horizon. We already know that smoking increases your health risks, and smoking also increases your life insurance premiums -- a lot.
In the end, your life insurance policy is what stands between your family and financial ruin, should something happen to you. Get educated about life insurance, and purchase a policy as soon as you can.
(To be continued)
If you have questions, send me an email.
Iddi Sandaly
Email: isandaly@gmail.com
1 comment:
More on mistake #2:
For the vast majority, the younger you're the more human capital (and by extension the less financial capital) you have. This is the very capital you and your dependents cannot wisely leave unprotected. If you die while your kids are still in school and you do not have adequate life insurance or financial resources, chances are your dependents will experience fast-tracked financial ruins. So why wait until late in your life cycle, at which time you have less human capital (and possibly have more financial resources anyway)?
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