There’s a lot to know about life insurance. But some of the most important things to know are what not to do. Following are a few common mistakes many people make regarding their insurance needs.
Buying too little
When considering life insurance, many people may not buy enough coverage to ensure that their family is adequately covered. According to CNN Money, it will cost nearly $234,000 to raise a child to age 18. That doesn’t include helping them through college and into their early 20s. Also consider the cost of daily living, the mortgage and other debts when adding up your expenses.
Too short a term
If you underestimate how long of a term you need, the premiums may go up quite a bit when it’s time to renew. Take a moment to map out your family’s ongoing financial needs, including food, mortgage, car expenses and education among other things, and how long you will need coverage.
Waiting too late
Don’t wait too long to buy life insurance. Should something happen to you, would your loved ones be protected financially? Another benefit when you buy sooner is that premiums will increase as you get older. It’s a good idea to lock in your term as soon as possible.
Feeling too comfortable
Do you think your insurance needs are all set because you have a policy through your employer equal to one or two times your salary? Is that amount enough to cover your family’s financial burden if you die? A general recommendation is to purchase coverage for 10 times your annual salary.
A lot of people think they don’t need life insurance because they have adequate assets at hand. How many of these resources will be readily available to help your family should you die? Some assets could be tied up in partnerships or businesses and could take a while to unravel. A life insurance payout is an immediate benefit that can go to work quickly to help your family through a tough transition. In addition, the benefit is not subject to federal income taxes.
You have a life insurance policy. Congratulations, but your responsibility does not stop here. Your needs may be different now than in five to ten years when your lifestyle and family may have changed. Always take time to review your coverage and make sure the benefits and term work for your current situation.