Silvia Perez Insurance & Financial
Mistakes in your life insurance policy usually have two things in common. First, they cost a lot. Second, you could have easily avoided making such mistakes if only you had been more careful. However, there are simple ways to prevent them. Here are the top five most common life insurance mistakes and the best way to avoid them.
Naming Your Estate as Beneficiary
If your estate is your beneficiary, you might end up paying a lot of inheritance taxes. This option also puts the claims at risk because it gives access to creditors. However, if you name beneficiaries to be your spouse, parent, or child, then creditors can’t access the money. The solution is simple – change the beneficiary to a person or organization that you want to receive the claims.
Failure to Name Backup Beneficiaries
You may have named your beneficiary, but you still need to name two more "backup" beneficiaries. That will be a big problem if your named beneficiary dies. In that case, your insurer will pay the proceeds to your estate. That will then become accessible to creditors and will incur high taxes. The solution will be to name two backup beneficiaries as well as two backup trustees if you need it.
Failure to Check Your Policy Every Three Years
There’s a problem if the proceeds of your health insurance claims are going to some former spouses or people who you don’t like anymore. Make sure to update the policy every three years. The point is that any child born after you’ve signed the policy is clearly outside the coverage. Also, a checkup of your policy once in three years would make you consider adjustments in the policy. This is true if some aspects of it may not work for you anymore. Ask about the confirmation of the policies from your insurer in writing. Also, ask about the procedure how to update the beneficiary records.
Inadequate Personal Coverage
If your personal coverage is not enough for your family’s financial needs, then that’s going to be a problem. Your family may be entitled to receive a lump sum of money when you’ve passed away. However, the question is how long can the coverage pay for their food, clothing, and shelter after a specific number of years. The solution is to assess what and how much your family will need in case your death happens.
Estate Planning Errors
One of the most common mistakes that you can make with your life insurance is that your policy may be payable outright to specific grandchildren or children. The problem here is that your children or grandchildren may have different needs in life. There’s a question on whether you need to allocate shares equally among them. The solution is to decide to set up a trust that will be in charge of your spouse and kids. Then, formally name that trust as the beneficiary of the proceeds from life insurance claims.
Some Final Words
It’s not easy making a mistake when it comes to life insurance. A mistake could cost you a lot of money and a lot of stress at the same time. The most important thing to do is to consider the details of your insurance policy carefully and ask questions in case you need clarifications.
At Silvia Perez Insurance & Financial Solutions, we aim to provide comprehensive insurance policies that make your life easier. We want to help you get the insurance that fits your needs. You can get more information about our products and services by calling our agency at (831) 524-8411. Get your free quote today by CLICKING HERE.