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Seven Mistakes To Keep Away From When Buying Term Life Insurance Coverage
If you are considering canceling a current policy, you may want to take a look at these 7 potentially dangerous mistakes individuals make with their life insurance before you do.
1. "I'm all set for life insurance!"
According to a recent poll of middle income Americans, most respondents felt that people should have some life insurance, but believed that it should only be necessary to cover existing financial debt and funeral costs. Surprisingly, only about 20% felt that term life insurance should replace the income of the deceased for the surviving family's benefit.
In fact, having a life insurance coverage that is equivalent to seven to ten times one's recent salary is the minimal advice for someone with young children.
2. "Life insurance? I'd rather not talk about it."
For most folks, thinking about death is more than a little awkward. Yet, many people do want to make sure their beloved are financially comfortable after their passing.
Locate a few minutes to sit down with your spouse and ask the question, "How would you and the children make it if I were to pass away?" It is important to address this topic at this point.
3. "My father told me to have coverage comparable to 7 times my income."
In today's world, that is not as useful of a measure because of the various life circumstances found today. Many dynamics that were not so common 50 years ago can be found easily today. An unmarried person with no kids has much less of a requirement for insurance than the family with a stay at home spouse and 4 young kids.
A more accurate technique is to make a list of the things that you want to protect. How will your spouse manage the home loan, taxes, utilities, put food on the table, maintain the automobile, and many others?
4. "I never thought of that."
Benefits such as health insurance, retirement accounts, child care credits, etc. all cease at the death of an employee. The topic that needs to be asked then is, " If I die, that subsidy disappears. How will my family pay for health-care after I'm gone?" Part of the solution of course is to make sure your term life insurance policy will pay enough cash to cover the new health insurance bill.
5. "I'm much too busy to worry about life insurance now."
It's not hard to lose sight of the long term view when we are so consumed with handling our day to day lives. A rule of thumb is to plan that your children will be "dependent" until age 25 due to college and finding a career. If your youngest is 10 today, you would want to have at least a 15 year policy to cover that risk period.
6. "It's too expensive."
That is a huge oversight in thinking, as it is possible to find a plan that fits your needs and your finances. Today, term life insurance is much more affordable than permanent insurance, and is the perfect tool for managing your fiscal risk.
7. Bought it and forgot it.
Are you the same person now that you were 5 years ago? If we are truthful the reply is, "No." Maybe there have been some changes to your way of life such as getting married, having kids, buying a house, etc. These huge life events are exactly why you should take a look at your life insurance policy periodically to make sure that your policy covers your "new" situation.
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