Post Menu and Details.
- 1. Procrastination
- 2. Buying Not Enough or Too Much
- 3. Relying on Work-Life Insurance
- 4. Getting the Wrong Policy
- 5. Not Comparing Rates
- You're Not Your Life Insurance Mistakes
Reading time: ~2 minutes
How much money is your life worth? That depends on your life insurance policy. All of our lives are valuable; insuring them is just one way to show their worth.
On your way to doing so, you want to avoid life insurance mistakes. To learn about five common life insurance mistakes and how to avoid them, keep reading.
Like with many other tasks in life, procrastinating on buying life insurance is bad. It’s also potentially selfish, because what if you died suddenly and left your young children (if you have them) behind without a payout?
Maybe the cost causes you to procrastinate. That’s no excuse because life insurance is probably cheaper than you think. Most people think it’s three times more expensive than it actually is.
A healthy, 30-year-old nonsmoker only has to pay about $160 a year for a $250,000, 20-year term life policy.
2. Buying Not Enough or Too Much
Life insurance isn’t for everyone.
If, for example, no one else depends on your income, you don’t need much or any life insurance.
On the other hand, parents of young children need life insurance. Breadwinners’ policy should be at least seven times their annual salary, along with money to fund college and pay off debt.
Stay-at-home parents should have some coverage, but they don’t need as much. Their coverage should be enough to provide for child care and the stay-at-home parent’s other services.
3. Relying on Work-Life Insurance
Your employer’s free group life insurance policy is free and great, but it’s probably not enough if your family depends on your income.
Employers’ coverage is usually one to two times your salary. That’s not enough for a family if its breadwinner passes away.
Also, an employee loses coverage when he leaves the company. A free policy from your employer should be no more than a bonus in addition to a policy you buy yourself.
4. Getting the Wrong Policy
Life insurance comes in two main flavors: term and permanent.
Term life insurance provides coverage for a designated period, like 10, 20, or 30 years. It pays out if the policyholder dies over the course of the term.
Then there’s permanent life insurance, which lasts your whole life and has a savings component. That’s known as cash value; it expands over the years.
You can surrender the policy for cash or borrow against the cash value.
Most families should buy term life because most of their needs are finite. Term life is good while you pay off debt or your children grow up.
5. Not Comparing Rates
Comparison is the thief of joy, except for when shopping for life insurance.
Be a savvy consumer by comparing your options. Like with other purchases, choose the policy that has the most to offer (including paid-up additions) for the lowest price.
You can even use an independent broker to do the work for you.
You’re Not Your Life Insurance Mistakes
We all make mistakes, but they don’t have to define us. You’re not your mistakes.
Although none of us is perfect, we can still strive to avoid making mistakes, including life insurance mistakes.
Not committing the errors listed above is a good start. For more guides on how to do better in life, peep the How To’s Guides section of the site.