3 Common Financial Planning Mistakes that Affects Insurance

Proper financial planning can go a long way towards improving your quality of life as you get older. If you plan carefully and stick to the plan, you can live comfortably without having to take any drastic measures along the way. However, sometimes we fail to plan correctly and it ends up costing us in one way or another. Here are a few common financial planning mistakes that affect your insurance coverage.

1. Lack of Retirement

When you get to the age of retirement, it’s nice to have a little bit of a nest egg built up to live on. Most people are ready to retire and start enjoying life. However, by the time they get to that point, many people do not have enough money to live on. This can create many problems and in some cases causes the retired person to go back to work. 

Some people left in this scenario will liquidate any assets that they have in order to stay retired and support themselves. One common tactic is to cash in their whole life insurance policy. If you're over the age of 65 and have been paying into a whole life insurance policy all your life, the cash value is probably quite substantial. If you are desperate for the money to supplement your retirement income, it can be a ready source of funds. However, this is not an ideal solution as it causes you to lose the policy benefits.

If you were to die without any life insurance after cashing in the policy, your loved ones could be left with a large burden. Your life insurance policy is designed to take care of your final expenses and leave money for your loved ones to live on. Cashing in your whole life insurance policy as a result of a failure to plan is not a good situation for anyone to be in. 

2. Medical Bills

Another common financial problem is in the area of medical bills. Dealing with medical bills is something that everyone will have to do at some point in their life. Medical insurance is designed to help with the bills and keep you from getting in over your head. However, sometimes the bills are great even with the help of medical insurance.

A common way for people to save on insurance premiums is to get a high deductible health plan and start a health savings account. However, some people just get the high deductible insurance plan and forget to save with the health savings plan. In that case, you may be left with a large bill for your deductible and coinsurance with no one to help pay for it. 

3. Policy Loans

Another common financial problem in dealing with insurance is in the area of policy loans. Some life insurance policies allow for loans on the cash value. Many people use these loans because they are easy to obtain. However, if you fail to plan on how you will pay the loans back, it can really come back to hurt you. You may lose your policy and the benefits for your family. 

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