You don’t need a business degree to choose the right protection for your family. Term life insurance is super simple and straightforward to buy.
If you’ve decided to get coverage, you’ve already avoided the biggest mistake of all: not taking the steps while you can to protect your family. So consider these tips extra credit. Avoiding these term life insurance mistakes can help you get the best deal and secure the right protection possible for your loved ones.
Common term life insurance mistakes to avoid
About 70% of Americans say they need life insurance, but only 54% actually have it, according to a recent LIMRA annual consumer study. Fear or lack of knowledge might be holding people back from purchasing life insurance. Here are some of the most common term life insurance dos and don’ts:
Not Buying Enough Life Insurance.
U.S. life insurance ownership has dropped 9 percentage points to 54% over the past decade. And many people are not buying enough life insurance coverage. About 43% of people say they either don’t have enough life insurance coverage or simply aren’t sure if they have enough coverage. But exactly how much life insurance coverage do you need? A typical rule of thumb is to buy about seven to 10 times your annual income in life insurance coverage. You’ll also want to consider all of the regular expenses your family would need to pay to live comfortably if you were no longer there. These may including rent or mortgage, utilities, groceries, car payments and insurance, home insurance, medical insurance, credit card debt, personal loans, and medical debts. If you’re still not sure how much coverage you should buy, check out our term life insurance calculator here.
Waiting Too Long To Get Coverage.
Life insurance costs more each year you get older, so delaying coverage is one of the biggest term life insurance mistakes to avoid. You also run the risk of having a change in health that could make getting covered more expensive or even impossible. For example, about 133 million Americans, 40% of the total population and half of all adults, have incurable and ongoing chronic conditions. If you develop a chronic illness, it can be much more difficult to get covered. Looking into life insurance coverage earlier in life to help ensure you can get the coverage you need.
Buying Too Short of a Term.
A 10-year life insurance policy might be cheaper, but if it ends and you still need coverage, you’re going to pay higher premiums if you need to buy a new policy. It’s best to round up if needed. For example, if your mortgage will be paid off in 13 years, consider a 15-year life insurance policy.
Naming the Wrong Beneficiary.
There are a few common mistakes around naming your beneficiary, including forgetting to choose a backup beneficiary, naming a child as a beneficiary, or not telling your beneficiary about the life insurance policy so it goes unclaimed. It’s important to know the rules and laws in your state before you choose your beneficiary. For example, some states have particular rules around who you can choose, and if you name a beneficiary other than your spouse, they might still have a legal claim to part of the death benefit.
Relying Only on Group Life Insurance.
Employer-provided life insurance, also known as group life insurance, is a great option, since it’s typically low cost or even free and its easy to be approved. However, employer-provided life insurance usually doesn’t provide you with enough life insurance coverage, and it doesn’t stay with you if you switch jobs. We recommend buying your own individual term life insurance policy to supplement the group life insurance you receive at work.
Forgetting To Keep It Up to Date.
Once you buy life insurance, it’s important to regularly review your policy to help make sure it meets your current needs and life situation. For example, if you divorce and remarry but forget to update your ex’s name on the life insurance policy, then they will receive the payout – which may not be what you intended.
Still have questions about life insurance dos and don’ts?
We’re here to help. Fidelity Life offers a wide variety of products to support people at every stage of life. Get your quote online today or call one of our agents at (855) 291-6365.
At Fidelity Life, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed, and updated regularly to ensure the information is as relevant as possible.
