7 Big Mistakes To Avoid When Purchasing Life Insurance

Purchasing life insurance, although often an overlooked investment, is incredibly important to anyone with assets, beneficiaries or debt. While it’s not pleasant to think about your death, planning today will give you comfort and confidence knowing your family is financially secure if the unexpected were to happen tomorrow.

If you’re unfamiliar with life insurance, it’s good to know that not all policies are created equal. There are a number of options, so educating yourself on which policy is best for you and your family will help protect them in the future. As you compare policies, avoid these common mistakes when purchasing life insurance coverage.

Not Comparing Agencies

Speak with a few life insurance agents and compare policy rates before committing to a plan. Your life insurance agent should listen to your needs, provide a few different options, and be willing to answer any questions along the way.

Deciding Without All The Facts

Don’t be forced into purchasing a life insurance policy that you know doesn’t fit your long term financial goals. Depending on something who is motivated to sell a particular product likely won’t give you all the answers you need. Plans differ by insurers, not just by cost, so don’t rely solely on an individual with a vested stake in one product.

Forget To Update Beneficiary

When a major life event occurs, revisit your policy to ensure your beneficiary setup is still correct. You’ll want to choose a primary beneficiary and then a contingent, or backup beneficiary. Many people forget to update their plans following a divorce or birth, so it’s good to review your policy each year.

Purchasing Without A Plan

Have a clear financial plan for your future. Work with your life insurance agent to determine how much coverage you will need. Being underinsured can leave your family in a tough space financially if ever they need to make a claim on the policy. Conversely, you don’t want to be over insured, leaving retirement or savings accounts underfunded.

Failing To Research

Whether you venture out on your own or consult a financial advisor, make sure you understand the terms, cost, and benefits of any life insurance product you purchase. You’ll also want to ask what the fees or penalties are for canceling a plan.

Not Thinking Big Picture

Life insurance isn’t about the next 10 or 15 years of your life. Concentrate on the next 30 years and the money it will take until that point to secure your family financially. Consider your mortgage, any other debt, and college costs for your children. Consider whole life insurance versus a term policy – especially if you’re in your 30s or 40s.

Waiting Too Long To Buy

The sooner you buy life insurance, the less you are likely to pay (and more likely to gain the coverage you want). Age and health are huge factors in purchasing life insurance, so time is not on your side. Buy life insurance now to prevent paying more for the same coverage down the road.