UPDATED: Mar 26, 2020
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Buying term life insurance might seem overwhelming at times, and many people are afraid of making a mistake when purchasing coverage. Below are some common mistakes to avoid when researching and buying a term life insurance policy.
Buying the Cheapest Policy
Many people go straight for the lowest priced policy rather than the one of most value. Before selecting the least expensive product, you should consider the financial strength of the company and the product’s features including the length of the guarantee period, convertibility rights, and available riders. Usually, for a little extra money, you can buy a policy with better features, more flexibility, and from a company with superior financial strength. Luckily, shopping through a term life website makes it easy to compare term life insurance rates from top-rated companies quickly.
Not Buying Enough Coverage
Most experts recommend purchasing a policy with a death benefit equal to 10 times your salary. However, everyone’s needs are different. You should take into consideration your annual income before taxes, how much your dependents need and their current age to get a better estimate of your family’s needs. Use a free Term Life Insurance Estimator to help determine how much coverage to buy.
Not Buying for Long Enough
If the purpose of the insurance is to provide coverage for a specific period in your life, then your policy should allow you to maintain the coverage at a guaranteed rate for the period you require. For instance, if you’ve just had a child, and you want to ensure that he or she will be taken care of for the duration of their youth, you should consider a 20-year guaranteed level premium product. If you buy a shorter term guarantee and intend to renew, check to see what the renewal rate will be. Chances are it will be more expensive to renew than purchase the term length you need as you will have aged some and the prices are likely to go up with time.
Allowing a Lapse Between Policies
Sometimes it is necessary to switch life insurance policies or companies. But before dropping an existing life insurance policy make sure the new one is in force. It is important to remember is that some life insurance coverage is better than having no coverage at all.
Buying term life insurance is one of the most important financial decisions you can make. You and your family deserve the protection and the peace of mind that term life insurance can offer. Before making your decision, be sure to consult with a licensed agent who can walk you through the process and help you choose the right company for you.