How To Avoid Mistakes
There are often many pitfalls awaiting you when you decide to buy a life
insurance policy. Of course, one of the best things you can do is to
consult with a knowledgeable and experienced life insurance specialist
who will be able to guide you through the purchase and advise you
regarding the many options available. If, however, you decide to make
this purchase on your own, do be aware of some of the following mistakes
that are often made by people regarding their life insurance policies.
The biggest mistake made by many is to be underinsured. Although the original intent was always to purchase a policy that would provide sufficiently for their loved ones in case of death, many get side-tracked by the investment/ cash surrender values of policies and make their purchases based on that, instead of the face value death benefit. Of course, the reason this occurs so often is that people cannot afford to purchase the high death benefit needed for their family’s comfort and the tempting investment policy. Unfortunately, many frequently purchase what they least need.
Understand that group insurance policies are not cheaper than individual ones if you are a healthy person. Groups must cover healthy and unhealthy people, whereas, an individual in good health can obtain a much lower rate on their own.
Another often-made mistake is having numerous life insurance policies
for little amounts, instead of one policy that will adequately provide
for your family upon your death. Many people are covered by mortgage
insurance, credit card insurance; credit life insurance with a car loan,
etc. All of these are both costly and unnecessary as long as you have an
adequate life insurance policy. Buy only one policy that will take care
of everything.
Deciding to cover only one income in a family is a mistake. Unless the second income is totally unnecessary, which is highly unlikely, be sure to cover both. Even if your spouse is a homemaker, consider how much it would cost to pay someone for everything your spouse is currently doing for free. Someone would have to provide childcare, plan and cook meals, clean the home, do the laundry, and run errands. All of this, too, must be calculated into your policy amount so that you family can maintain their current standard of living when you are not there to support them. While estimating your spouse’s value, you should also consider an additional policy for the spouse in the event of death. This, too, can be devastating to a family and should be considered in estate planning.
Purchasing a life insurance policy for a newborn child is definitely not necessary. What should be done at that time is to increase the parent’s policies to reflect the new responsibility in their lives.