Risks to Consider Before Purchasing Life Insurance

Life insurance is a type of coverage that protects human health, body, and life. It involves an agreement and a signed insurance contract where the policyholder pays premiums, and the insurer pays a specified amount in the event of a risk or contract expiration.

However, buying life insurance still poses risks that many people may not be aware of, potentially impacting the policyholder's rights significantly. Here are potential risks associated with purchasing life insurance and ways to mitigate them:

Encounter Fake Agents and Scams:

Risk: Deceptive individuals may impersonate life insurance agents to collect money from customers, leading to financial loss without receiving desired benefits.

Mitigation: Verify an agent's credentials by checking their agent code and the Insurance Agent Certificate issued by the Ministry of Finance. Customers can contact the insurance company directly to confirm the agent's information.

Risk of Purchasing Unsuitable Products:

Risk: Not all life insurance products include comprehensive protection, accumulation, and investment factors. Purchasing an unsuitable product may result in claim denials or paying unnecessarily high premiums.

Mitigation: Clearly identify personal needs and thoroughly understand the coverage and benefits of the insurance product. Ensure that the chosen policy aligns with specific situations and provides desired benefits.

Excessive Premiums Impacting Financial Capability:

Risk: Aspiring to maximize benefits may lead to high insurance premiums, potentially exceeding the financial capacity of the policyholder. This can cause financial strain for the individual and their family.

Mitigation: Strike a balance between desired benefits and affordable premiums. Avoid overcommitting financially and choose a premium that aligns with long-term financial stability.

Non-disclosure of Accurate Information:

Risk: Failure to provide accurate personal information during the insurance contract signing may lead to disputes. Intentionally concealing facts can result in denied claims.

Mitigation: Truthfully declare all relevant information, including age, gender, occupation, health status, and desired benefits. Inform the insurance company of any changes promptly.

Exclusion of Certain Risks in the Policy:

Risk: Life insurance policies often exclude coverage for intentional acts, participation in illegal activities, or engaging in hazardous sports or events.

Mitigation: Understand the policy's terms and exclusions. Abide by legal and safety standards to ensure coverage eligibility and prevent complications during claims.

Early Withdrawal Risks:

Risk: Withdrawing funds from a life insurance policy prematurely may lead to reduced benefits. Early withdrawals within the first two years usually result in no premium refund.

Mitigation: Be aware of withdrawal consequences and evaluate the necessity of withdrawing funds. Avoid early withdrawals if possible to maximize policy benefits.

By being vigilant and well-informed, individuals can navigate potential risks associated with life insurance, ensuring that their coverage meets both immediate and long-term needs.