7 Problems To Keep Away From When Purchasing Term Life Insurance
If you are interested in canceling a policy, you may want to think about these 7 mistakes people make with their life insurance before you do.
1. "I'm all prepared for life insurance!"
According to a recent survey of medium income Americans, most respondents felt that consumers should have some term insurance, but believed that it should only be sufficient to cover existing debt and funeral costs. Surprisingly, only about 20% felt that term life insurance should compensate the income of the deceased for the surviving family's sake.
In truth, bearing a life insurance plan that is equivalent to seven to ten times one's present salary is the minimum recommendation for someone with young little ones.
2. "Life insurance? I'd rather not talk about it."
For most people, wondering about death is more than small unpleasant. Yet, many people do want to make sure their family members are financially secure after their passing.
Find a couple of minutes to sit down with your spouse and ask the question, "How would you and the kids make it if I were to pass away?" It is crucial to approach this subject at this point.
3. "My dad told me to have coverage equal to 7 times my salary."
In today's culture, that is not as useful of a measure because of the different life scenarios found today. Many basics that were not so common 50 years ago can be found openly today. An unmarried person with no dependents has much less of a need for insurance than the family with a stay at home spouse and 4 young young children.
A more accurate approach is to make a list of the details that you want to protect. How will your significant other manage the home mortgage, taxes, utilities, put food on the table, maintain the car, etc?
4. "I never thought of that."
Benefits such as health insurance, pension accounts, child care credits, etc. all cease at the death of an employee. The question that needs to be made then is, " If I die, that subsidy disappears. How will my loved ones pay for health-care after I'm gone?" Part of the response of course is to make sure your term life insurance policy will pay enough cash to cover the new health insurance bill.
5. "I'm too busy to worry about life insurance now."
It's easy to lose sight of the long term view when we are so consumed with managing our day to day lives. A general guideline is to plan that your kids will be "dependent" until age 25 due to college and finding a profession. If your youngest is 10 at present, you would want to have at minimum a 15 year policy to cover that risk period.
6. "It's too expensive."
That is a huge error in thinking, as it is possible to find a policy that fits your needs and your budget. Today, term life insurance is much more affordable than permanent insurance, and is the perfect instrument for managing your financial exposure.
7. Bought it and forgot it.
Are you the same individual now that you were 5 years ago? If we are sincere the reply is, "No." Maybe there have been some changes to your lifestyle such as getting married, having kids, buying a house, etc. These major life events are exactly why you should review your life insurance policy at regular intervals to make sure that your policy covers your "new" situation.
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