Life insurance is considered as one of the most important insurances to purchase. It’s basically a contract between you – the insurance policy holder – and the insurer which can either be an independent company or a bank. In this contract, the insurance company promises that they will pay the agreed amount upon your death.
But some life insurances can also make payments for critical and terminal illnesses, as well as funeral services. With it, you will surely have peace of mind and your family won’t worry too much about such financial payments for whatever cause. Nevertheless, it also has a fair share of disadvantages that every consumer should know. To start things off, here’s a list of it.
- Purchasing a complicated insurance – this is a twin buying a life insurance. Most people think that if they’ll purchase the complicated-sounding insurance gives them more coverage and benefits. And despite its rate they still consider it worth it. But on the contrary, purchasing an insurance with complicated terms will technically complicate the entire situation.
- Expensive policies – another hobby of most Americans would be to go for the expensive policies. Again, this is with the thought that it will give more benefits. Keep in mind that the advantage of every insurance, regardless of its kind, does not lie on its price. Whether that’s a cheaper insurance policy as long, as the coverage you need is included, then that’s fine.
- Returns – the disadvantage of such insurances which pertains to its return. Typically, it would take 10 years or more before the policy will gain cash value. This means that it will also take 10 or more years before you can invest on something such as stocks or bonds.
- Hidden fees – just like any other kind, this life insurance also entails hidden fees. Companies and banks are truly good at hiding it and next thing you know, you’re already puzzled with all the payments and fees you have to cope up with. This is also the reason why the value accumulation takes much time. To avoid dealing with it in the future, it’s best to consult financial and insurance experts.
- Necessity and need – although a life insurance (as said in the introduction) is one of the most important security blanket one can obtain, doesn’t mean you are obliged to buy one. If there’s one mistake regarding life insurances, that would be the fact that people purchase it without considering other vital factors. On top of this list would be the need. Do you really need the policy? Do you have dependents? If your answer is no, then better not purchase.
Whether you opt for the term or the whole-life insurance, the considerations to make are still the same. As a consumer, it is your responsibility to ensure that you’re on the right path, that you’re purchasing the right coverage and you’re dealing with a reputable bank or insurance company. Drawbacks cannot be erased, it’s just in the matter of handling it the right way and avoiding it if possible.