When it comes to buying life insurance there’s a simple rule of thumb to follow… buy it when you don’t need it.
In fact, there’s a famous quote that goes something like this— “history informs us of our past mistakes, so we may learn from them.” Learning from other people’s mistakes is easier than finding out for ourselves what not to do.
And when it comes to life insurance there are a few pitfalls that can be avoided by paying attention to common mistakes that others have made in the past.
Life insurance mistakes to avoid
Not electing for any insurance coverage seems to be the number one mistake that most people make. In fact, over 40% of people in the US don’t have any coverage or too little, according to JD Powers.
Sadly, many families have been devastated by lack of coverage, or no coverage at all.
The second most common mistake is that people often underestimate how much insurance they’ll need.
For example, say a family has two income earners (which is very common these days). Well, in this case it’s important to make sure that both of them have life insurance coverage. In this case, the loss of income could be devastating to a family.
Unfortunately, many times only one person will have coverage.
And even if one person works while the other stays home it’s still important for both parents or guardians to be covered by life insurance.
A few years ago, my friend Jerry lost his wife Melissa to cancer. Melissa was a stay at home mom who cared for the kids. When she died, there was no life insurance policy that would cover expenses for childcare. They had not anticipated the value of a stay at home Mom. It was a real struggle for Jerry to pay for childcare with his salary.
What’s another insurance mistake people make?
Not applying for life insurance when you are young. And healthy.
The cost for a life policy will increase with every passing birthday. It always makes more financial sense to acquire a policy while you are young and healthy. However, most young and healthy people are too busy or not concerned enough about the future to think about life insurance. Young people often wait until they start a family or get married to think about “stuff” like insurance.
Even if you aren’t so young or healthy, always be truthful when applying for life insurance. Not disclosing medical conditions when applying for a policy can be a reason to deny coverage to a policy holder.
Life insurance policy premiums will be lower for you when you apply, and get a policy, when you’re younger and healthy. However, whatever your needs for life insurance it makes sense to speak with a knowledgeable insurance agent when it comes time to buy a policy.
With so many different types of life insurance sitting down and speaking with a professional can help you to get the policy you need, for the right amount of coverage, at the best price.
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