In an effort to save money on life insurance, some people will intentionally omit certain information or stretch the truth. When applying for life insurance, however, it is critical that you be completely honest. Providing inaccurate information may result in your insurance company denying your claim, jeopardizing your family’s financial security.
Avoid naming your estate as beneficiary
It is not a good idea to name your estate as the beneficiary of a life insurance policy. This is because the proceeds of the policy will be passed to your estate after your death, causing issues with taxes and probate. In addition, the proceeds of the policy can be subject to creditors’ claims. It is also advisable to avoid naming minors as beneficiaries.
In addition, naming your estate as the beneficiary will delay the distribution of proceeds. Instead, name someone else. This will help ensure that your insurance proceeds will be quickly distributed after your death. If you have a spouse, naming them as the beneficiary is a good idea.
While naming your estate as the beneficiary is perfectly legitimate, it may also pose a set of disadvantages. For one, the proceeds from your life insurance policy may be subject to claims from creditors. By naming someone else as beneficiary, you will protect your estate from these claims.
Avoiding hiding medical conditions
When purchasing a life insurance policy, it is important to avoid hiding your medical conditions. In some cases, this can lead to a policy cancellation or loss of death benefits. If you are caught, you may even face insurance fraud charges. If you have a serious medical condition, you should discuss it with an expert. Your agent should be able to place you in contact with the right people for further discussion.
Avoiding cash value life insurance
If you own a life insurance policy that provides cash value, you should avoid making some of the following mistakes. First of all, understand your policy’s payout conditions. If you don’t understand what you are purchasing, you could end up with a very poor financial situation. Second, don’t shortchange your retirement savings.
Borrowing from the cash value of your life insurance policy is a great way to pay off a mortgage or supplement your child’s education, but be careful not to use it for nonessentials. For example, if you have credit card debt, it is easy to be tempted to use your policy’s cash value as collateral. While this is a valid use of cash value, it can also lead to a very poor financial situation.
Another mistake to avoid when purchasing a cash value life insurance policy is allowing it to lapse. This mistake can cost you money and could end up costing you your death benefit.