Term Life Insurance Mistakes
Many people are afraid of making a mistake when purchasing Term Life Insurance. Sadly, some may put off buying coverage because they are intimidated by the process or they have questions about what kind of coverage they need. To help ease some of the fears, we have compiled a list of the top 10 mistakes people make when purchasing term life insurance. We hope this helps make your investment in your family's future fast and easy.
Procrastinating or Waiting to Obtain Coverage
Waiting to buy coverage leaves your loved ones and assets vulnerable in the event of your sudden or unexpected death. Also, consider that life insurance premiums generally increase as we get older, so buying sooner rather than later can save you money. If your health declines, you may pay more as well - assuming you can still get coverage at any cost. Delaying for any reason is risky financially and could mean coverage becomes limited or not available at all.
Trusting Quick Online Quotes
The Internet is full of online forms and calculators that spit out a fast term life insurance rate quote. These tools may be handy for getting a rough idea of what you might pay, but it takes more detailed analysis to nail down an accurate rate. Your age, health, budget, medical history, and other individual factors need to be included in the evaluation to determine an appropriate amount of life insurance and term length - as well as an accurate rate. Plus, a licensed life insurance agent can provide you with an accurate rate based on your health profile.
Purchasing Unsuitable Term Length or Coverage Amount
How much coverage do you need? For how long? There are plenty of variables to consider when shopping for Term Life Insurance. Coverage amounts of $250,000 or $1 million can sound like fortunes, but some people discover too late that the amount of money they purchased doesn't cover everything they had intended. It's important to figure out your current expenses and do your best to accurately assess future costs. A licensed life insurance agent can help at no cost to you or you can use our handy online term life insurance needs calculator to get a clearer picture of your term length and coverage amount needs.
Purchasing Life Insurance that is not Medically Underwritten
Without conducting a medical exam, a life insurance company cannot determine who is healthy or not, so the company spreads the mortality risk across all of the policies and averages the cost. With these types of life insurance policies, people with a greater risk for dying (higher mortality risk) are paying the same rate as those who are healthy (lower risk). If you are healthy, medically underwritten term life insurance can often save you money. With an accurate health profile, the life insurance company can place you in the appropriate rate class, and charge you according to your specific health situation, not averaged in with those are not as healthy.
Neglecting to Periodically Review Your Policy and/or Needs
It's always a good idea to go over your term life insurance policy in the same way you might review other aspects of your financial or retirement plan. The life insurance coverage that fit just fine when you first got your policy years ago might not be the best for your needs anymore. Getting married or divorced, having or adopting children, taking on a mortgage and other life events can greatly affect your term life insurance needs. You might decide you need more coverage - or less. Or you could decide to convert your term life insurance policy to a permanent policy.
Relying Solely on Employer Coverage
Employer-provided life insurance is a wonderful benefit, but in many cases, it simply doesn't offer enough protection to sufficiently help cover your financial future. It's typically considered a perk - one that isn't based on your specific needs. By having a personal term life insurance policy, you can secure enough coverage to protect your loved ones and tailor it to your specific term life insurance needs.
Overlooking Expenses that Should Be Considered
When people shop for term life insurance coverage, they may focus primarily on the most obvious expenses, which could result in being drastically underinsured. Here are some commonly overlooked expenses you should take into account:
- Is there enough money to cover additional childcare costs?
- Will your family require help to maintain the household?
- Do you plan to pay for your children's college education?
- Do you want your family to be able to pay off your mortgage, or buy a home?
- Will your family have health coverage - and money to pay for it - if you are suddenly taken from them?
Assuming Smokers or People with Health Problems Cannot Get Coverage
Policies are available for smokers and people with health conditions, but it's important to be honest with your life insurance agent. It will help the agent to give you the information you need to get the appropriate coverage. The medical exam will reveal tobacco usage (including the nicotine used in transdermal patches). If you quit smoking or your health improves significantly after getting your policy, you can always speak to a life insurance professional to see if it's possible to qualify for a lower rate.
Insuring Only the Primary Breadwinner
Many people think only in terms of insuring the family's main breadwinner. It's important to recognize that a person maintaining a home and caring for a family has a financial value, even if they are not currently earning money. If an individual takes care of children or another person in the home, such as an elderly parent, the care giver's death could create unexpected - and significant - expenses. These costs can run for years and really add up.
Assuming Only Families Need Insurance
Term life insurance is the number one life insurance choice for families. But, children aren't the only reason to secure financial peace of mind. Here are some areas for you to consider:
- Dependents such as elderly parents or siblings
- Assets
- Debts and obligations
- Funeral costs/Medical bills
- Charities/Philanthropic projects
Term Life Insurance is an affordable, reliable way to protect your loved ones and assets, whether you are single, married or have a family. However, there are important factors to consider and avoid common mistakes made.
Our licensed life insurance agents work with you to help you apply for an appropriate amount of coverage and get the affordable term life insurance you need. We're here to help!