When shopping for life insurance, there are many decisions you’ll need to make. The process can be overwhelming, and you may end up choosing a policy that doesn’t fully meet your needs. However, understanding common life insurance mistakes ahead of time can help you avoid them. From procrastinating to choosing the wrong type of coverage, here are the top mistakes people make when buying life insurance.
Life Insurance Mistake #1: Relying Solely on Group Life Insurance
Group life insurance is often offered in employee benefits packages. While it’s easy to qualify for, it usually does not provide enough coverage for your needs (experts typically recommend coverage that equals 10 to 15 times your annual salary). And, because the policy will only cover you for as long as you work for the company, it’s not as reliable long-term as a policy you purchase yourself. Relying only on group life insurance may also cause you to put off purchasing life insurance on your own, which can mean more expensive coverage in the future.
Life Insurance Mistake #2: Procrastinating to Buy Life Insurance
The most affordable time to purchase life insurance is when you’re young and healthy. Older individuals, and those with health issues, typically pay higher life insurance premiums, so locking in a lower rate earlier in life is a wise decision. It’s also a good idea to think about getting coverage for not only current expenses, but future ones as well, like a mortgage, having children, paying down student loans or saving for retirement.
Life Insurance Mistake #3: Choosing the Wrong Type of Life Insurance
When choosing the type of life insurance you need, you’ll be deciding between term life insurance and permanent life insurance. You’ll want to assess the benefits of both life insurance types to ensure you make the best decision for you and your loved ones.
One of the biggest differences between the two can be life insurance cost. Term life insurance is the most affordable option, providing substantial coverage at often a low monthly (or annual) life insurance rate. Permanent life insurance is, therefore, the more expensive option, but has the perk of lasting your lifetime, so long as the premiums are paid.
Term Life Insurance
Term life insurance gets its name from your option to choose the “term” or length, allowing you to only buy it for as long as you need it. While it doesn’t build up a cash value like permanent life insurance, term life insurance is usually the most affordable way to protect your family’s financial security.
Permanent Life Insurance
Permanent life insurance represents a category of several types of life insurance without a pre-set expiration date, including whole life insurance and universal life insurance. As the name implies, it’s designed to last for your entire life and the coverage does not expire as long as the premiums are paid. Permanent life insurance policies usually come with a cash value component that grows over time and can act as a savings account.
Life Insurance Mistake #4: Forgetting About Your Future Financial Responsibilities
Life is full of unexpected changes, but having the right life insurance coverage can make those changes easier to navigate. When purchasing life insurance, it’s important to consider both current and future financial responsibilities. Planning for life events like getting married, starting a family or starting a new job will help you decide on the right amount of life insurance coverage for your needs.
Life Insurance Mistake #5: Not Purchasing Enough Coverage for Your Life Insurance Beneficiaries
Because life insurance is meant to replace lost income if you pass away unexpectedly, most people plan for coverage that is 10-15 times their annual salary. However, your policy should be enough to not only cover immediate expenses, but also provide longer term financial support for your beneficiaries. This is especially true if you have young children, large expenses like a mortgage, or if any of your loved ones rely on your income. It can be hard to know exactly how much coverage to purchase, but using a life insurance calculator can help.
Life Insurance Mistake #6: Not Shopping for Life Insurance in the Right Place
Life insurance policies, including life insurance rates and coverage, vary by life insurance company. Life insurance policies, including life insurance rates and coverage, vary by life insurance company. Understanding your options can seem challenging, but shopping with a broker can make the process easier by helping you narrow down your options and find the right fit for you. Because a broker works with multiple life insurance carriers, they can search different policies and offer you unbiased price comparisons, making the life insurance shopping process more smooth and tailored to your needs.
Avoid Making Mistakes When You Purchase Life Insurance and Let SelectQuote Help.
Shopping for life insurance can be a complicated process, but we’re here to make it easier. At SelectQuote, our experienced licensed insurance agents will help answer any questions you have about life insurance coverage. We quickly search highly-rated carriers, finding you the right fit with less hassle.
