Buying Term Life Insurance - 10 Common Mistakes
People don't buy life insurance for a number of perfectly mistaken reasons. The fact is that life important is an important financial vehicle. Once you understand the most common errors people make concerning term life insurance, you will be better prepared to make the correct choices.
- I don't need life insurance yet. The best time to buy life insurance is when you are young. Just because you are healthy right now and do not have any mortality issues is not the same as not needing coverage. None of us knows what tomorrow will bring, and a catastrophe can strike anyone, regardless of their age, medical condition or income level.
- The cheapest insurance is the best insurance. In many cases, the cheapest insurance is also the most restrictive. Before you buy that cheap economy-style policy, read through it carefully to find out what is excluded from coverage. Many of those cheap policies have exclusions affect the final payout value.
- I do not need to update my insurance. Every time your life and property changes, your insurance needs to be updated. This includes such things as buying a new home or car, or expecting a new child in the family. Review your insurance periodically to make sure that it is still able to provide enough coverage for all the things and people you care about.
- I have coverage through my employer. Employer-sponsored life insurance is usually dependent on your employment with that company. You can keep the employer-sponsored coverage, but purchase a private policy that will not be lost if your job changes.
- I am the breadwinner, so I am the only one that should be insured. Many people think of life insurance as the way to avoid a loss of income when the main breadwinner passes away. The truth is that stay at home parents fill a full-time position as well. Insure every member of your family, even if you only purchase term life coverage that will pay for the cost of final expenses.
- One term life insurance policy covers everything. In most cases, each term life policy is purchased to meet a single goal, such as paying off the mortgage or providing college tuition. One policy is hardly ever enough coverage to pay for all the things that will need to be paid for when you die. Instead, pick up term life policies for each new life event, and review your policies often to make sure you have sufficient coverage.
- I don't want a policy that requires a medical exam. Life insurance policies that do not require medical exams will cost you more. The reason they are more expensive is because the insurance company has no way to properly assess the mortality risks of their customers and so must distribute the cost of insuring less healthy customers across the board.
- My policy covers all the costs. Does the term life policy include 10 years of childcare expenses for your pre-teen children? How are you going manage caring for your live-in mother or disabled uncle? No single life insurance policy is going to cover all of the bases, but the more you can include in the policy when you buy it, the better you will be served if the policy pays out.
- I am single and do not need life insurance. Single people are not immune from dying. If you are breathing, you have insurable interests. Single people may not need as much coverage as would the only working parent in a family of 5, but they need to be covered. If nothing else, pick up a policy that will pay for your final expenses.
- One quote is the same as any other quote. Not all insurance quotes are the same. You should compare quotes before buying a policy. Compare the policies to find out what is included in the coverage and what is excluded. When possible, choose a policy that can be converted to a whole life policy down the road, which will help you avoid losing the premiums you have paid in for years.