Life insurance is vital to having peace of mind and financial security. Doing it right the first time is critical, considering a life insurance policy is a long-term investment. Avoiding these common mistakes if you are planning to buy a life insurance policy:
1. Not Purchasing Insurance Soon Enough
While you might think that you don’t need life insurance now because you are young and healthy—that’s precisely why you shouldn’t wait! Premiums and coverage are much less expensive when you are younger. If you are generally healthy, you can invest in an excellent policy with considerably lower premiums than buying one later in life.
The moral of the story? Don’t wait to get life insurance coverage. If you are married, have children, are planning to have children, or own a home, buying life insurance in your younger years is far more affordable and can keep your premiums lower for the long term.
2. Not Enough Coverage
One of the most common mistakes is buying insurance but underestimating the right amount of coverage. For example, buying the cheapest option available at age 25, only to discover that the term insurance you purchased ends when you reach age 55 and you still plan to work until 65, but leaves you without protection. Term life insurance does not allow you to gain cash value in the policy, which you may need in your senior years. If you search for a new policy at 55, the premiums will be significantly higher, and benefits paid lower than what you could have purchased at 25 or even 35.
The solution? Meet with an insurance agent to ensure you are covered for as long as you need. Rather than choosing the cheapest option, choose a policy that will cover your financial needs with the option to borrow to pay a mortgage, college tuition, or to pay off debt should you need to. A good rule of thumb is insurance coverage for at least ten times your annual income.
3. Relying on Employer-Provided Insurance
Many employers offer group life insurance. Depending on the policy, this strategy could leave you underinsured, especially if you change jobs or in the unfortunate event that you find yourself being let go.
What to do instead? Consider employer-based life insurance as a supplemental benefit. Consider an individual policy that will stick with you regardless of your employment situation. You also have a better ability to customize your life insurance, which will help you achieve your financial goals and have a greater sense of security.
4. Not Reviewing Your Policy Regularly
Life insurance is not a “set it and forget it” situation. Life insurance is an investment, and if treated properly, it can contribute to a much brighter financial future for you and your loved ones.
How to get the most out of it? Have your life insurance policies reviewed yearly to ensure they meet your current situation, adding beneficiaries, such as new children, as needed. After major life milestones, like marriage, divorce, birth, or death, it is necessary to reevaluate your current policies, and we can help.
5. Underestimating the Power of Policy Riders and Add-Ons
Policy riders make your policy unique. They protect what you care about and provide for any eventuality so that you can have peace of mind. Overlooking these options leaves you with a cookie-cutter policy that could better suit your situation.
What is the best way to use riders and add-ons? Please speak with one of our agents about what you want your policy to do for you. Tailored coverage can be drawn up to match your situation. Examples of often overlooked add-ons to ask for:
- Child term: These policies insure a child up to a specified age (e.g., age 25) with an option for the child to convert it to being their own later.
- Return of premium: If you outlive your policy, this rider guarantees you will receive the total cash value of the premiums paid.
- Spousal: Adds coverage for a spouse under the same policy, usually for a reduced price compared to buying a new policy.
Make the Most of Your Coverage
By following these helpful tips, you can make the most of your policy and get the coverage you need. Contact one of our agents today if you want to discuss other ways to improve your existing coverage or look over a new policy. Your financial well-being and future are in your hands, and we’re here to help.
