3 Pitfalls to Avoid When Buying Life Insurance

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Getting the right amount of coverage at the right time could make all the difference.


Key points

  • A life insurance policy can provide financial protection for your loved ones.
  • To get the right coverage, consumers can research the amounts and types of coverage.
  • For many people, buying a policy when they are younger can mean paying a lower premium.

Buying life insurance can seem like a daunting process. First, consumers should shop around multiple insurance companies and compare offers to get the best rates. But in addition, the mere idea of ​​hiring life insurance implies contemplating your own mortality. And let’s face it, that can be unsettling.

Still, many people find that buying life insurance is important to their loved ones. That way, they will have some degree of financial protection in the event of the policyholder’s untimely death.

But if you’re shopping for life insurance, it’s important to avoid some of the pitfalls consumers commonly fall into. Here are three specific ones to avoid.

1. Get a higher amount of coverage

The higher the death benefit an insurance policy provides, the more expensive that policy tends to be. Therefore, it’s a good idea for a consumer to strike a balance between giving loved ones the financial protection they need without overspending.

To that end, there are a few formulas you can use to determine how much coverage you want. For example, someone might opt ​​for a death benefit that will replace 10 times her salary, in addition to paying her existing debts and covering funeral costs.

When shopping for a policy, it’s a good idea for consumers to try not to be sold on too high a death benefit. For example, someone who currently earns $60,000 a year and has $150,000 in mortgage debt may find that a $2 million death benefit is more than necessary.

2. Choose a whole life policy instead of a term life policy

Whole life insurance can be attractive. With a whole life policy, the policyholder accumulates cash value that they can use or borrow. Plus, they get coverage for the rest of their lives.

On the other hand, a term life policy only provides coverage for a specific term or period of time. And if the policyholder doesn’t die within that time period, the policy will be worthless once it expires.

But while whole life insurance may seem attractive, it can be prohibitively expensive. And the danger of buying it is that the policyholder could have a hard time keeping up with premiums in the future, to the point where he’s forced to let his coverage lapse. Depending on when that happens, they could be left with little or no cash value in their policy, resulting in a situation where they effectively throw their money away.

3. Wait too long to start

Health problems tend to arise as we age. Now, this doesn’t always happen, and some people manage to get into a healthier state in their 40s than in their 30s, for example.

But for the most part, the longer people wait to apply for life insurance, the more expensive their premiums will be. Therefore, people who want to protect their loved ones may not want to put off the process. Instead, they can make it a priority at a younger age to secure premiums they can afford over time.

Setting up life insurance is one of the smartest financial moves a consumer can make, as long as you avoid these pitfalls along the way.

Life insurance protection for you and your family

While many varieties of insurance coverage are designed to help protect a person’s family and assets, life insurance is a vital type of protection. The right life insurance can help protect the people who depend on you most if you die. Choosing the right life insurance policy is critical to ensuring that your loved ones are properly protected. We’ve ranked the various options to give you our picks for the best life insurance policies available today.

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