Considering Life Insurance? Don’t Make These Common Mistakes

When considering which auto or home insurance option best fits their needs, consumers spend hours mulling over their choices. Most consumers meet with their insurance agent prior to making a final decision. Why is it then, that they spend considerably less time on their life insurance decisions; one that promises to affect not just their financial future, but that of their family’s?

It’s true, life insurance is typically a future benefit. One that affects us minimally while we’re alive, yet tremendously once we’re gone. If you are considering the purchase of a life insurance policy, it is imperative that you explore all your options. Today, we will share with you the most common life insurance mistakes and how you can avoid them.

Considering it a “fringe” product. Many consumers only consider life insurance once they have some disposable income. While none of us really want to face our mortality, there are a number of reasons why we should plan for the inevitable and place it higher on our priority list.

Relying on group life insurance to be enough. While group life insurance is a wonderful part of many employee benefit packages, these policies are rarely enough to cover a family’s needs. If this is something you’re considering, our blog The Downside to Purchasing Life Insurance Through Your Employer offers more information you need to know before making a final decision.

Procrastination. Most consumers wait until they are older to purchase life insurance. While your insurance needs are not totally clear when you’re young, single, and childless, there are benefits to purchasing at that time. Since age and health are the two greatest factors that influence your life insurance rates, this is, arguably, the most ideal time to invest. If you determine later on down the line that you require additional coverage, at least you’ve planted a solid foundation to grow on.

Purchasing the wrong type of policy. There are a multitude of different policy types on the market, each designed to fit a specific need. Before making any decisions, be sure to speak with your agent. They can assist you in matching product with need.

Not purchasing enough insurance. The purpose of this policy is to ensure your family is financially secure in the event of your death. It only makes sense, then, that you choose the right amount of coverage. Our blog How Much Life Insurance Coverage Should I Purchase? offers some useful information regarding the most common methods of arriving at this figure.

Listing a minor as a beneficiary. While most parents purchase life policies to ensure their children are cared for financially, naming a minor as a beneficiary is not a good idea. If you pass away before they turn 18, the death benefit will be tied up in the system for quite some time. The court must appoint a legal guardian and court costs and attorney fees will be incurred. Your best bet is to list your spouse or a trusted family member as beneficiary or set up a life insurance trust, naming the trust as the beneficiary. This protects everyone involved and keeps the death benefit from being delayed.

Listing an estate as the beneficiary. Avoid the lengthy probate process by naming an individual, trust, or organization, as opposed to your estate. Avoiding listing the estate also protects the death benefit from potential creditor claims.

Forgetting to review your policy every few years. Insurance agents and financial advisors suggest reviewing your life policies every 2-3 years. If any major life events have occurred, you may need to consider increasing your coverage or changing your designated beneficiaries.

To learn more about life insurance planning, contact a Vista Life Insurance agent today.