Life insurance is an affordable way to ensure your loved ones are protected financially if you pass away, but buying a policy can be a bit intimidating. From choosing the right amount of coverage to determining which type of policy you want, it’s easy to make the wrong decision. Here are common mistakes you can avoid when looking for a life insurance policy, brought to you by Jan Gleisner, a trusted San Diego financial advisor.
Choosing the Wrong Type of Insurance
There are two primary types of life insurance: term and whole. Term policies are the most commonly chosen because they’re affordable. A term policy offers the protection you need when you’re most likely to need it, such as when you have a mortgage, young children, and debt. You can choose a term of 10 to 40 years. Whole insurance is much more expensive, but coverage is permanent no matter how long you live, as long as you keep up with payments. Unlike term coverage, a whole life insurance policy has a built-in savings component and builds value over time. You can borrow against your policy when you need to.
Assuming Group Coverage Is Enough
It’s common for employers to offer group life insurance as an employee benefit. This type of coverage can be affordable, although limits tend to be low. You may get up to $20,000 or more in coverage without a medical exam with the premiums taken out of your paycheck. However, this coverage will probably end if you leave the company for any reason, including retirement.
Getting Too Little Coverage
Term insurance is popular because you can buy more coverage than with whole insurance. Don’t make the mistake of getting minimal coverage just to save money. The most important thing you can do when shopping for life insurance is determining how much coverage your family will need. Consider your family’s amount of debt, whether you have a mortgage, how much income your family will lose if you pass away, and the value and services you offer, such as child care. Along with thinking about what your family would lose if you are gone, you may want to consider how a life insurance policy can improve the lives of your family. For example, you may want to buy enough coverage to pay for a child’s education.
Buying a Policy without Considering Lifestyle and Health
There are many factors that determine the premium you pay for coverage. Along with age and gender, your health and lifestyle will play a major role in the cost of your insurance policy. Some insurance companies treat health conditions and lifestyle choices like smoking more favorably than others. It’s always important to let your agent know if there is anything that might increase your premiums. Depending on the insurance company, even a DUI or felony conviction could affect your ability to get a policy.
Waiting Too Long
Don’t put off buying life insurance. The older you get, the more expensive your premiums are likely to be. You also risk developing conditions like hypertension that can increase the price of your insurance or even make it more difficult to find a policy. It’s best to purchase a policy while you’re young and healthy, if possible.
If you’d like to learn more about planning for life insurance, get in touch with a reliable financial planner. Jan Gleisner has over 16 years of experience in the financial services industry, currently serving.