Buying life insurance can be a difficult, time-consuming process. From the various types of policies available to the amount of the death benefit needed, and who it should go to, there are several decisions that you need to make. Whether you’re young and looking to purchase your first policy, or you’ve undergone some life changes and want to switch up your coverage, it’s easy to get overwhelmed.
As you do your research, you’re likely to find countless sources that extol the virtues of certain coverages and provide you with advice on the numerous things that you need to do to obtain coverage. Rather than adding to that pile, we’re here to simplify the process for you, by telling you the things that you should not do when looking to purchase life insurance.
Mistake #1: Not Having Any Life Insurance
Some people procrastinate on purchasing coverage; they assume they don’t need to think about life insurance until way off in the future. Others may have had coverage in the past but have let it lapse and not gotten around to renewing it. Others have group life coverage through their work and believe that this coverage is more than enough. Still others think that their current health problems, old age or risky lifestyle would make them ineligible for coverage.
The worst life insurance mistake you can make is not having any at all. No matter how old you are and what you do, talk to a life insurance agent today. Be honest about your health and lifestyle, and they will be able to help find the right coverage for you.
Mistake #2. Having the Wrong Life Insurance
Depending on who you are, your family make up, and the status of your finances, you’re likely to have different life insurance needs.
- Type of Policy: If you don’t have a lot of extra income but want to make sure you’re covered, an inexpensive Term Life policy can provide protection until you have the budget to upgrade. If you’re ready to have a life insurance policy for your whole life that builds cash value, a Whole Life policy would be the best coverage.
- Coverage Amount: Only 63 percent of parents with young kids have life insurance at all, and half of those have less than $100,000 in coverage. The coverage amount will differ depending on what you want the death benefit to cover. You may only need it to cover your funeral and burial, but if you’re the family breadwinner and have children or other dependents, the cost to replace your income will require a higher amount. To get to the right figure for your coverage amount, it’s recommended that you add up your long-term financial obligations (such as college tuition, debts, mortgage, and total income replacement) and subtract your current life insurance coverage and liquid assets. Take a look at the Life Insurance Needs Calculator on our website.
Mistake #3: Not Taking Your Life into Account
As stated above, your lifestyle, age, and medical history will play a part in your life insurance coverage and cost. Definitely don’t lie to agents or on your application about not being a smoker or having a certain condition. Higher premiums may not be appealing now, but if your insurer finds out that you were dishonest, they can deny you coverage, raise your premiums or cancel your policy.
If you want to make a change, lying isn’t the answer. You may not be able to lower your age or eliminate any serious medical conditions, but making healthier lifestyle changes (such as quitting smoking, cutting back on drinking, losing weight, minimizing risky behavior, and driving safely) may help reduce your premium.
Mistake #4: Not Naming the Right Beneficiary
When it comes to naming your beneficiary, there are a few key things to remember:
- Don’t name a minor as a beneficiary. If you want a minor to receive your death benefit, you will need to either name a custodian or set up a trust.
- You should name secondary and contingent beneficiaries. Unfortunately, it is possible that your primary beneficiary could pass away before you. If you want your survivors to receive your death benefit, naming additional beneficiaries will ensure that they can do so.
- Don’t name your estate the beneficiary. This could be tempting, if you do not have any family, trusts, or organizations that you’d like the death benefit to go to. However, if you name your estate as beneficiary, then the death benefit will have to go through the probate process with the rest of your estate, and it will extend the amount of time it takes for your beneficiaries to receive any benefits. In addition, the benefit could be subject to claims from creditors.
Mistake #5: Not Regularly Updating Your Policy
As a rule of thumb, you should check back in with your insurance agent every couple of years. Go over your coverage amount, your policy details, and your designated beneficiaries, and you can easily make changes to the policy. Any major life event (including but not limited to marriage, divorce, having children or grandchildren, inheriting money, losing your job, becoming disabled, or becoming ill) is also the time to reconvene with your agent.
About National Catholic Society of Foresters
At National Catholic Society of Foresters, we pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. Sales from our financial services products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs. Our portfolio is extensive, ranging from various life insurance policies to IRA’s to support your financial needs no matter what stage of life you’re in. For more information, contact our friendly experts today at (855) 804-7424.