On the surface, buying life insurance may seem like a straightforward proposition. You purchase insurance that provides monetary benefits to your spouse, child, or loved one in case you pass away unexpectedly. However, several mistakes can be made which may put you or the beneficiary in a less-than-ideal situation.
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What follows are the top five most common mistakes that people make when purchasing a life insurance policy.
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Choosing a Policy Based only on Price
It’s common for many people to purchase the least expensive item, but that can backfire when paying for a life insurance policy. You will need to know what you want if the features and benefits of the policy are right for your needs and the status of the insurance company. These factors play stronger roles than how much you pay for the insurance, so keep that in mind when searching for the right policy.
Naming a Single Beneficiary
This is one of the most common mistakes that policyholders make when choosing life insurance. A single beneficiary may pass away before you do which means that your estate receives the money which may cause a host of issues to occur. So, you will need to name a principal beneficiary and then one or two backup beneficiaries in case the primary one is no longer around. Naming three beneficiaries and putting them in order greatly increases your chances that one of them will receive the benefits.
Buying the Wrong Type of Policy
You need to select a policy that is right for the needs of you and your family. This means buying enough to cover the financial requirements of your family over a set period while keeping the monthly premiums within your budget. You’ll have to do a little research and conduct some projections that include funeral expenses, loss of income, and other financial issues so you can get the right benefit amount.
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Not Properly Valuing a Non-Working Spouse
Even though your spouse may not be drawing a paycheck, what they do for your family is worth many thousands of dollars. Too many families do not take this into account when purchasing life insurance on the breadwinner and wind up spending too much on premiums. Be sure to consider what your non-working spouse does which may mean having a lower benefit level and lower premiums.
Purchasing a Policy that Increases in Premiums over Time
It seems rather fantastic that someone would buy a life insurance policy that only gets more expensive over time. However, many senior citizens are drawn in by the low rates that they pay at first without considering how the increases in premiums will affect them in the future. To avoid this issue, make sure that the policy has no increases when it comes to the premiums so that you are not financially pressed in the future.
By avoiding these mistakes, you can find a life insurance policy that best fits the financial needs of your family without paying too much in premiums.