10 life insurance mistakes to avoid

Doing your research and thinking long-term can help you avoid some common life insurance mistakes.

Getting life insurance can give you and your family peace of mind that they’ll be protected if you die. But it’s a big commitment!

To help you get the right protection in place for your loved ones, we’ve put together some common life insurance mistakes to watch out for.

Waiting too long to get life insurance

Despite what you might think, life insurance isn't just for older people.

In fact, getting life insurance when you’re young could be a smart move if you have financial commitments such as:

a mortgage
a spouse, partner or other family members that depend on you financially
children.

This is because your monthly premiums are calculated using your current age and your general health. And a younger age can mean lower premiums, all things being equal. Even if your health doesn’t change, you’ll likely pay higher premiums in ten years’ time due to your age.

So, taking out a policy while you’re young can lock in lower premiums for the whole of your cover term.

At Beagle Street, we offer fixed premiums with all our policies. This means that once you’ve taken out a policy, your premiums don’t go up as you get older or if your health changes (unless you request changes to your policy).

Taking out the wrong type of life insurance

There are different types of life insurance that suit different needs.

The type that's right for you will depend on what you need your payout to cover and how much you want to pay every month. Making sure you understand the difference between the types of life insurance available means you’ll get the most suitable protection in place for your loved ones.

We offer two types of life insurance at Beagle Street – level term life insurance and decreasing term life insurance. Both policy types are term products, meaning they only last a set amount of time, but there are differences in how they pay out.

Level term life insurance

Level term life insurance will pay out an agreed sum if you die during the policy term.

This is generally best for covering fixed costs, such as:

household bills
funeral costs
leaving your family a cash lump sum when you die.

Your payout and your premiums won’t change throughout the length of your policy (unless you make changes to your policy). That way you’ll know how much your loved ones would get if you die within the policy term.

Decreasing term life insurance

With decreasing term life insurance the value of the policy decreases over time, but your premiums stay the same throughout the policy term (unless you make changes to your policy).

It’s often used to pay off debts like a repayment mortgage. This means that as the amount you owe on your mortgage decreases, the payout to your loved ones if you die within the policy term does too.

For this reason, decreasing term life insurance is usually cheaper than level term life insurance.

Thinking you don’t need life insurance

Most people think about getting life insurance when they have someone that depends on them financially, like a spouse or children.

If you’re single with no dependants, you might feel like you don’t need to get life insurance cover. However, it could be worth it if you have other people that financially depend on you. This could include your parents, other family members or a partner that you’re not married to, or in a civil partnership with.

Another reason to consider life insurance if you’re single with no dependants is when you buy a house. It’s usually recommended (and sometimes required) by your mortgage provider to take out life insurance. A payout could then be used to pay off your mortgage if you die within the policy term.

Your family and friends are likely to want to give you a send-off if you die. A life insurance payout can be used to cover funeral costs, which can often be quite high.

If none of this applies to you – or if you’re getting life insurance through your employer already – then it might not be necessary.

Of course, if your situation changes in the future you may find that you’d benefit from getting life insurance.

Forgetting about costs that need to be covered

We get it, it isn’t fun to think about a time when you’re no longer around. But when taking out life insurance it’s important to consider costs like:

your funeral
debts your loved ones may be liable for
childcare, and your child’s education
mortgage payments
maintaining your family’s lifestyle, including into retirement.

The amount of cover you take out should factor in all the costs your loved ones might need the payout for. This can help ensure they’re able to have a good quality of life if the worst should happen.

Not taking out enough cover

As part of thinking about all the costs you’d want a life insurance payout to cover, you’ll also need to think about your family’s future in the long term. What kind of lifestyle do you want to protect for those you leave behind, and how might that change over time (for example, your kids going to university)?

You can use that to work out how much cover you might need, based on the length of time you’d need to protect your loved ones’ lifestyle.

Not insuring for long enough

You can choose how long you want your life insurance policy to cover you (the policy term).

So make sure your cover will last as long as you need it to. For instance, you might decide to take out term life insurance to cover your newborn child’s future university costs. If your policy term is 20 years, it could put them at risk of being short of funding if you die in their final year of university.

It’s impossible to predict what life might throw at you. Taking a cautious approach to the length of your cover could give your family that little extra bit of security.

Not guarding against inheritance tax

In some circumstances, a life insurance payout could count as part of your estate when you die. This may make the payout taxable, if it pushes your estate value over the inheritance tax threshold and any relief or exemptions don’t apply.

A way to guard against inheritance tax on your life insurance payout is to put your policy in trust. This can keep it out of your estate, which means inheritance tax doesn’t apply to the payout.

If you have a Beagle Street life insurance policy, you'll need to place your policy in trust to name your beneficiaries (this is currently only available for single policies). We’ll provide you with a free trust tool to do this.

Please be aware that there are legal and tax consequences involved with setting up a trust. So it’s important to get the right financial and legal advice before putting your life insurance in trust.

Not telling the truth on your application

When filling out a life insurance application, you might be tempted to bend the truth a bit – especially if you think the information could affect the premiums you’ll be paying. But this is never a good idea, and comes with a lot of risk.

If the truth comes out as part of an investigation into the cause of your death, the payout on your policy could be reduced. Or your policy could be invalidated altogether.

Answering all questions truthfully can help ensure your loved ones get the payout they deserve.

Allowing your premiums to lapse

This might seem like an obvious one, but if you don’t pay your life insurance premiums then your cover will stop. This mean your loved ones won’t be protected.

Missing payments is often down to a simple oversight, which can be easily corrected. For example, if you’ve got a direct debit set up to pay your premiums and you change banks, you’ll need to update your payment details with your insurer.

But if you find yourself in financial difficulty and are no longer able to pay your premiums, talk to your insurer as soon as possible. They’ll be able to discuss your payment options with you.

Not reviewing your policy from time to time

It can be easy to just set up your life insurance and forget about it. But life is all about change, and your circumstances may be different to when you first set up your policy.

If your cover no longer meets your needs, it may be possible to tweak your existing policy. Or you might decide to take out a new policy.

You could end up saving money, too. For example, if you’ve given up smoking for at least a year you might be able to pay lower premiums for your life insurance going forward.

Get life insurance right with Beagle Street

We’re a dedicated life insurance provider that cares about protecting you and your loved ones.

We’ll guide you through the application process, so you can have confidence that your family will be protected.

With terminal illness cover included in all our life insurance policies as standard, and critical illness cover and children’s critical illness cover available as simple add-ons, we’re also flexible and able to meet individual needs.

What’s more, we’re committed to sticking to the premiums we offer when you take out your policy. This means the amount you pay each month will never go up, even if there are changes to your health (unless you request changes to your policy).

Don’t just take our word for it. We’re proud that our customers have rated us ‘Excellent’ on Trustpilot!

Ready to find out why? Our simple, quick quote tool will let you know how much cover you can get and how much it’s likely to cost you.

There’s no commitment to take out a policy.

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