How many times have you heard that you need life insurance? Like a million, right? Perhaps you already have a policy and feel you're appropriately covered. After all, you followed the advice you’ve heard countless times. Or, maybe you don’t have one yet, and want to make sure you’re starting off on the right foot. Whether you’re a life insurance veteran or a newbie, it’s important to review any life insurance policies you already have in place or are potentially considering, because you may be making one of these four common mistakes.
1. Neglecting to Regularly Review Your Policies
One of the most common life insurance mistakes is neglecting to regularly review your policies in the first place. You should review your life insurance policies, even briefly, at least once per year.
Imagine for a moment you went a decade without looking at your life insurance policies. During that time, your expenses might have dramatically increased along with your income. Because the purpose of life insurance is to protect your family's income, you might have been inadequately covered for a long period of time. If the breadwinner had passed away, your family might have had to heavily sacrifice in order to stay afloat.
2. Forgetting to Shop Around for the Best Deal
Beware of hiring a “captive agent.” Captive agents are insurance agents that are employed by one company to sell their products. Unfortunately, they can't help you shop around for the best deal. Likewise, some independent agents only work with a few insurance carriers. While they're certainly better than working with a captive agent, you can find agents who shop a multitude of companies to deliver a fantastic deal.
You may even want to consider contacting multiple insurance agents to broaden your search for the best life insurance policies. Compare their quotes, and choose the best one.
Another option is to look at an insurance comparison website, such as PolicyGenius. If you’re looking for an all-in-one solution, PolicyGenius can provide you with a bird’s-eye view of your options.
3. Only Having Coverage Through an Employer
You might receive life insurance benefits through your employer. While your employer-sponsored policy might represent a great option, there's one important issue to be aware of: You can't take your policy with you when you leave your job.
That's why it's so important to make sure you compare the best life insurance companies and purchase an independent policy of your own. Remember, when you change jobs, you're still going to need life insurance, and you might need to change your coverage anyway. Switching jobs is stressful, and the last thing you'll probably think about during this transition is your life insurance.
Make sure to obtain personally owned life insurance and breathe easy knowing you're covered, no matter your job situation.
4. Continuing to Own a Policy That Isn't Right for You
Once you have reviewed your current policy, if you determine it isn't right for you, make sure to buy a more appropriate policy and then cancel your old one. There's no sense in continuing to own a policy that isn't right for you.
Primarily, there are two types of life insurance policies available: whole life insurance and term life insurance. Term life insurance is one of the most inexpensive and straightforward types of life insurance available, while whole life insurance comes in an array of flavors and boasts the ability to accumulate a cash value.
While it’s important to consider the cost savings of term life insurance, price isn't the only factor when choosing your policy. It's critical that you consider hypothetical scenarios to determine which policy is right for you. In many cases, term life insurance is the best option for families, as it keeps their premiums down so that they can invest their savings in traditional investments. Still, it's important to figure out what's right for you, not for the majority.
Don't feel pressured into purchasing a policy, and be sure you fully understand it. Many financial products, especially life insurance policies, are quite complex. It's best to explain to your insurance agent that you may need to take some time to explore your options before purchasing. If they don't understand that, look elsewhere.
You don't have to be an expert to avoid these mistakes. Just do your homework and choose policies wisely.
Rod Ebrahimi is a member of the DailyWorth Connect program. Read more about the program here.