Buying life insurance online is a lot easier than it was when a traveling insurance salesman came to your house, but it also means there’s no one you can ask questions of if you aren’t sure about some aspect of your purchase. Below are a few of the mistakes you need to watch out for when you make this important purchase.
Not Researching Enough
Purchasing life insurance is one of those tasks that is vaguely tedious and stressful at the same time. There’s a lot of information to plow through and you don’t want to get it wrong, but ironically, this can cause you to pull the trigger early instead of really understanding what it is you need and what your options are. Among the mistakes involved in not doing enough research is not understanding what type you need and not price comparing. Beware as well getting riders that you don’t need or that aren’t worth what you pay for them.
Buying Too Little Coverage
You shouldn’t overspend, but you shouldn’t spend too little either. You may think you have calculated enough by figuring out how long until your children aren’t minors any longer, but your insurance may need to cover other costs as well. For example, you might want there to be enough for your spouse to pay off your home and joint credit card debts or for your children to go to college. The main benefits of having coverage will vary with the amount you have.
Having the Wrong Beneficiary
Many people purchase life insurance because they want to protect their minor children in case anything happens to them, but does that mean naming the minor children as beneficiaries? It absolutely does not. Minors cannot inherit property, so you need to name a guardian instead. Some parents may want to set up a life insurance trust. It’s important that you review your beneficiary designation from time to time as well or after any major changes, such as deaths or divorces.
Not Understanding Your Policy’s Value
The issue of life insurance policies and values is a complex one. There are certain types of policies that act as investment vehicles. However, it’s a big mistake to assume that because you have not purchased this type of policy, yours does not have value and that you might as well simply stop paying premiums and let it lapse if you no longer need it. Instead, you should find out whether your policy is eligible for a life settlement. You can review a guide on this process, which involves a buyer taking over your premiums and paying you less than the death benefit offers but more than the surrender value. You will need to contact a licensed life settlement company to go through this process.
Putting it Off
It’s easy to keep postponing the purchase of a life insurance policy by telling yourself you’ll do it tomorrow. However, when you are relatively young and healthy is the best time to make the purchase. Furthermore, life insurance is all about preparing for the unexpected, so purchasing sooner rather than later is wise.