As long as you choose term life insurance, you’re doing well for yourself. But even the best term life insurance policies can be rendered less effective when you make certain mistakes. Finally, ready to get life insurance, and do it right? Here are five mistakes you should be careful not to make.
- Waiting it out.
Death is a tough topic for some people. It always seems like something in the distant future, which is why we make excuses as to why we don’t need it now. Instead, we say we’ll look into life insurance after age 40, or 50, or whenever. But between now and then, our health could suffer, making getting that ideal policy a little trickier.
How to avoid this: Go ahead and get that policy while you’re younger and healthy. If anyone depends on your income, or if you have children, you need it.
- Undervaluing yourself.
Income replacement is one of our main goals, but what you do for your family matters, too. If you don’t make very much money, you might not see the point of getting coverage beyond a certain dollar amount. Put a price on your role at home, too.
How to avoid this: Determine what it would cost your family if you could no longer serve at home. Would they need a handyman? A childcare provider?
- Picking the shortest term.
You shouldn’t choose the plan that costs the least; this usually covers a shorter amount of time, like ten years. In those ten years, your health could decline, which will make your next plan more expensive.
How to avoid this: Base your term length on what your beneficiaries will be doing that amount of time from now. If the plan ends after your kids are grown, your mortgage is complete, or a similar event, that’s a good length. If you’re committed to the long term and want to invest, consider ULIPs, too.
- Setting it and forgetting it.
Paying in each month is, frankly, just not good enough. Life isn’t static; change happens faster than we can keep up with at times. If your health has improved, you could save money on your policy. If your family has grown, you need more coverage.
How to avoid this: As major life events happen – new job, massive weight loss, new baby – review your policy, make sure it reflects where you’re at now.
- Not speaking about it with your family.
Does your family know you have a life insurance policy? More importantly, do they know where the paperwork is? When you pass away, the insurance company isn’t going to approach them with a huge check. They’ll need to have your policy information in order to file a claim.
How to avoid this: Go over the policy with your beneficiary, and show them where the information is kept.
If you’ve already gotten your term life insurance policy, good for you. To make sure it benefits your family to the maximum, review your policy periodically, make sure the amount truly replaces what you’re worth at work and at home, and have a frank discussion with your loved ones about the importance of life insurance.