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Posted on June 25, 2009 by Denise | Posted under Insurance
Ten Mistakes People Make When Buying Life Insurance
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1. Not buying enough coverage Experts recommend that you buy a policy with a death benefit that equals ten times your salary. But, this should be taken only as a ball park figure. Everyone's needs are different and there are a number of factors to be considered when deciding on how much coverage to apply for. In addition to figuring out your current expenses and estimating your future ones, there are some commonly overlooked expenses that do not get taken into account. These include additional costs required for childcare, household help and maintenance in your absence, your children’s college expenses, mortgage payments and health coverage for your surviving family members. Unfortunately, some people discover too late that the money didn’t cover everything they had intended. When people shop for term life insurance coverage, many focus primarily on the most obvious expenses, which could result in being drastically underinsured. To help determine how much coverage to buy, you could use the free life insurance needs calculators available online but also seek advice from a qualified agent or professional financial advisor to get a better picture of your needs and goals. 2. Buying the lowest price and not the best value Being constantly bombarded by companies promoting the cheapest insurance available, it is understandable that you might be swayed by the hard sell and not look any further before signing up. But before selecting the lowest priced product, you need to check whether you actually qualify for such a policy. The odds are that once the underwriting process is completed, the premium that you expected will be considerably more expensive and you will be stuck with a policy rate that you did not bargain for. Rather, study the offer carefully along with the financial strength of the company and the product's features, including the length of the guarantee period, convertibility rights, available riders, etc. There is a high possibility that for just a little extra, you may be able to purchase a policy with better features, more flexibility, and from a company with superior financial strength. 3. Opting for a short term period For example, if the purpose for your insurance is to provide coverage say until your children finish college, and your youngest child is 1, then your policy should cover you at a guaranteed rate for a minimum of 25 years. In this case, if to save money, you opt for a ten year term life policy, you would need to then opt for an eleventh year renewal rate. Keep in mind that most renewal rates are prohibitive. Alternatively, if you plan to take out another policy in ten years, your health might not be as good as it was when you were younger and once again you will be stuck with a higher rate. It is therefore imperative to list out all your financial goals and work towards achieving them in the most realistic manner. 4. Buying Life Insurance Is Not a One-Time Activity Evaluating your life insurance needs should be conducted at least every two to three years because circumstances change (marriage, divorce, or birth) and the amount of insurance you originally signed up for may no longer be enough. You might decide you need more coverage — or less. You might also decide to convert your term life insurance policy to a permanent policy if the situation so demands. 5. Buying a policy from the wrong company if you smoke Most insurance companies have different rates (normally higher) for tobacco users. Whether you smoke a pack a day or even chew tobacco, you can save a significant amount of money if you choose your insurance company carefully. There are some companies that treat tobacco use much more favorably and offer rates that are lower. A good online insurance provider or agent will help you find the right company. Affordable life insurance is still an option for those who smoke or who have health conditions but it’s important to be honest. Give all the relevant information to your agent to get the coverage. In case you lie about your tobacco use, the insurance company is fully within its rights to withhold paying any death benefits if this is proven. If you quit smoking or your health improves after you get your policy, it is never too late to speak to your agent and see if you can qualify for a better rate. 6. Canceling a policy prematurely With the advent of countless new policies with more and more attractive rates, it is possible that you might want to switch life insurance companies. Always make sure the new policy is in force before dropping your existing life insurance. 7. Delaying Buying Insurance The longer you and your family stay without insurance, the more vulnerable you are. Also, as you grow older the premiums and health risks increase leading to a limited or no coverage at all. A risk that is not worth taking simply because you have procrastinated. 8. Purchasing Life Insurance without a Medical Exam Opting for insurance without an exam works in favor of those who suffer from ill health. The principle behind such policies is that that mortality risk is spread across all of the policies and this averages out the cost. On effect, with such policies, people with a greater risk for dying (higher mortality risk) pay the same rate as those who are healthy (lower risk). But, if you are healthy, insurance with a medical exam might in fact save you money in the long run. An accurate health profile will place you in the correct category and your insurance company can then charge you rates according to your specific health situation (which may be much lower). 9. Relying Only on Employer Coverage Employer-provided life insurance it simply doesn’t offer enough protection. While a pleasant perk, it is rarely based on individual needs and requirements. It is therefore important to have a personal life insurance policy that is tailored to your needs in addition to your workplace coverage. Also, in case you leave your job, you cannot transfer your insurance to your new job. 10. Buying Insurance Only for the Breadwinner of the Family Many people think that insurance is only required for the main breadwinner of the family. It’s important to recognize that the person maintaining the home or looking after the family has as much financial value, even if they are not currently earning money. For example, in the absence of such a caregiver, the costs of childcare could really add up over the years and create significant expenses that might not have been budgeted for. About The Author: About AccuQuote: AccuQuote is a leader in providing term life quotes to people across the United States. In 1986 it began operating with a single goal: to make the process of buying term life insurance as easy as possible for its customers. Their experienced professionals consistently deliver the most affordable term life insurance rates by comparing thousands of life insurance policies from dozens of top-rated carriers. |
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