Five Big Life Insurance Mistakes

Getting the right life insurance policy can make a big difference to your beneficiaries. Here are five common mistakes you should avoid when selecting your coverage.

Don't Purchase the Wrong Amount

When you get a term life insurance quote, most experts will recommend that you get a policy that is five to ten times your yearly salary. However, you shouldn't think of this number as exact; this rule of thumb is offered only to give you a very general idea of your insurance needs. They fail to take into consideration your individual needs. For example, if you have a solid pension, you might be able to get a quote on a term life policy for less than the recommended amount. But, more commonly, people do not buy enough life insurance. This is particularly problematic when the policyholder has small children. When you shop for your policy, remember that lump-sum amounts that look like a lot might not add up to much spread over the decades your family will have to depend on it.

Don't Forget to Shop Around

Most experts advise against limiting yourself to just one company when you get a term life insurance quote. Some people make the mistake of talking to just one agent who is tethered to a certain company. This is not the best way to find the cheapest quote on term life. Especially for people who are in poor health, it pays to shop around. Get at least two or three quotes on term life insurance before you commit to a policy. Also remember that your life insurance shopping doesn't necessarily end when you take out a policy. When your term expires, you might want to shop for policies again to make sure there isn't a better offer out there.

Don't Be Discreet

Some policyholders make the mistake of being overly discreet about their life insurance policies. As a result, they end up leaving behind beneficiaries who have no idea that the deceased had a life insurance policy. Even if they knew about the policy, they might not know the company that issued it, which again leaves them in the dark. If you get a term life insurance quote, take out a policy, and don't tell your beneficiaries the specifics, your entire policy might go to waste if you die. If no one ever claims the proceeds of your policy, they will never be paid out, and your loved ones will never benefit from the policy you purchased.

Don't Forget about the Loose Ends

As you get your term life insurance quote, remember that all of the benefits that your loved ones receive through you will no longer be available to them after your death. For example, if your children and spouse receive health insurance through your employer, you will have to account for the cost of health insurance in your life insurance policy because coverage will cease when you die. Similarly, don't forget that costs will continue to rise after you die. For instance, the cost of a college education might cost a lot more after you die than you allowed for in your policy.

Don't Rely on Employer-Provided Life Insurance

You might think that because you have a policy through your insurer that you don't need to get a term life insurance quote. On the contrary, these policies often provide a false sense of security. They sometimes expire when you retire, at which point life insurance would be unaffordable for most people. Additionally, they are usually not worth enough money for most families' needs. You should evaluate your individual coverage needs to see if your employer-subsidized policy fulfills them.