Buying Life Insurance – 5 Mistakes to Avoid
Reader’s Question:
I’m currently shopping around for life insurance and a friend told me that I should buy as much coverage as I can, is this a good idea?
Alvin
Cape Coral, FL
Although it may sound like a good idea, buying the biggest life insurance coverage amount is not always the best course of action. This is one of the most-common mistakes people make when it comes to buying life insurance. When choosing the amount of coverage needed, one must keep in mind the following: Living expenses of dependents and for how many years, funeral costs, monetary and non-monetary income to be supplemented, and remaining financial obligations (debt. Mortgage etc).
Here are four other mistakes people make when buying life insurance:
- Choosing the Wrong Type of Policy – Basically, life insurance coverage can be divided into two types: Temporary (term life) and Permanent (whole life, universal life, etc). The former is best for those who are raising a family, while the latter is great for those who are looking into accumulating wealth in the long (long) run.
- Not Understanding the Coverage – Read the policy carefully, you’ll be paying for this coverage for at least the next decade or so. Know the stipulations and if your premiums are subject to change down the road.
- Not Updating the Policy – Getting married, having another child, and any other major life changes that entails more financial responsibility in your end should be reflected on your life insurance coverage.
- Not Shopping Around for Rates – The Internet has a wealth of websites (like this one) where you can get and compare cheap life insurance quotes effectively. This is a good way to find the most competitive policies while saving time and effort on your end.