It’s never too early to buy life insurance, especially if you want to make sure your family and loved ones are taken care of in the event that something happens to you. Specifically, a life insurance policy can help to cover funeral costs and related expenses while also providing financial stability for your loved ones. Before you buy a life insurance policy, however, you’ll want to be aware of some of the most common mistakes and how to avoid them with your own policy.
Deciding on the Wrong Type of Coverage
Understand that there are generally two types of life insurance coverage: term and permanent. A term policy is typically purchased and in place for a specific period of time. Term policies can be bought in increments of five years, ten years, twenty years, or more.
A permanent life insurance policy, on the other hand, is designed to last for the rest of the policy holder’s life. You’ll want to assess you specific financial situation to determine which policy type is best for you. Working with a financial advisor can also be helpful here.
Putting Off Buying a Policy
The worst thing you can do when it comes to buying a life insurance policy is simply waiting too long. Generally, life insurance policies are much less expensive when you’re younger, and rates increase as you age (even if you’re in good health). The time to buy life insurance isn’t after you’ve been diagnosed with a medical condition, as this will make it more difficult to find affordable coverage. The key is to buy life insurance long before you anticipate actually needing to use it. This way, you’ll be able to avoid high premiums and enjoy added peace of mind in the process.
Underestimating the Coverage You Need
All too often, people shop around for life insurance coverage without having the slightest clue as to how much coverage they need. You don’t want to be caught without adequate coverage in favor of lower rates, as this isn’t going to do you or your family any favors when the time eventually comes that your policy needs to be used.
To get a full idea of the specific coverage amounts you need, you’ll need to carefully assess your family’s costs of living, debts, and future expenses (such as sending a child to college). You’ll want to make sure that your policy pay-out is enough to cover all of these costs and then some.
Relying Exclusively on Employer Benefits
Some employers these days offer their own group life insurance policies, which are an added bonus but should not be used in place of an individual life insurance policy. Generally, employer life insurance benefits will only pay out a year or two of salary, which is typically not going to be enough for the average family to live off of. Instead, you should have your own life insurance policy and use your employer group policy as an added cushion.
Listing Minors as Your Beneficiaries
If you plan on listing your children as beneficiaries on your life insurance policy, keep in mind that they may not be able to receive the benefits right away if they’re under the age of 18 when you pass. For this reason, it’s generally recommended that you list an adult (such as a spouse or relative) as a beneficiary instead.
As you can see, there are a lot of mistakes that can be made when purchasing life insurance. To ensure that you make the right decisions when it comes to buying your policy, be sure to contact us for the professional assistance and guidance you need.