5 Life Insurance Mistakes You Can’t Afford To Make

Paying premiums, a possible health exam, and considering what happens after death are all difficult to deal with, so it’s no surprise that nearly 40 percent of adults in the U.S. don’t have life insurance coverage. However, the consequences of not securing your family’s financial future means what they’ll deal with if the unexpected were to occur will be much more difficult than shopping for the right policy. Whether you need to get life insurance coverage or already have a policy, here are the mistakes to avoid ensuring your family won’t be left in financial ruin.

Delaying Purchase

Life insurance isn’t reserved for a certain age. Not only is coverage easier to obtain when you’re young, but it’s also the time of your life when you typically have the most debt and financial obligations. Regardless, nearly 20 percent of all millennial parents have no life insurance coverage. Delaying your life insurance purchase means your family is at a great financial risk and you’ll end up paying more for coverage the older you get.

Too Little Coverage

If you’ve taken the step to buy life insurance coverage, review your policy to ensure it’s enough to protect your family financially. Your life insurance policy should cover at least five years of your yearly salary. For stay-at-home parents, use a $40,000 annual salary fill-in for your policy amount. You’ll also want to consider the cost of college if you have younger children. Increase your policy amount if higher education is in the plan.

Depending On Coverage From Work

Life insurance is often a benefit offered by employers, but in most cases it is not enough. Don’t rely solely on the policy offered through group coverage. Determine how much coverage you have (typically one to two times your yearly salary) and shop around for supplemental life insurance coverage.

Only One Partner Is Covered

The breadwinner in the home is not the only partner  or parent who should have life insurance coverage. It’s estimated that a stay-at-home parent brings $40,000 or more of value to the family. Without that parent, other child care and home maintenance options would have to be used.

Don’t Protect the Policy Proceeds

The lack of estate planning could mean children get your life insurance policy benefits in a lump sum when they reach adulthood – typically 18 to 21. Giving a young adult so much cash could spell disaster for their future due to a lack of money management skills. Establish a trust to oversee your assets until the children are old enough to handle the money wisely.

In order to find the best policy for your family’s needs, it’s best to work with a life insurance agent who doesn’t just represent one company. By partnering with an agent who has access to several policy providers, you can choose from a range of premium costs, policy types, and benefit amounts. Your family’s financial future depends on the choices you make today.