AmeriAgency recommends term life insurance – but have you thought through how much you’ll need or how long of a term to purchase? What about all those riders . . . are they necessary? Here are some common mistakes to avoid so that you can get the best coverage at the best value for your family.
Failing to purchase enough coverage.
First, and foremost, life insurance only serves its purpose when you have the right amount of coverage. 5X your income? This may seem like a lot of money, but you never know when or how tragedy may strike. Following this rule of thumb will help to ensure your family would be taken care of, all of their financial needs, no matter what comes your way. Be sure both spouses in your family are covered, too. Even stay-at-home parents require life insurance.
Waiting too long to purchase life insurance.
Not only could this put your family at serious risk if something were to happen to you, but purchasing term life insurance earlier in your life can save you money in the long run, as rates typically increase with age. Health issues that may arise later in life could increase your premium significantly, and may even make you ineligible to purchase life insurance all together. Some people wait because they think they should put off purchasing life insurance until they are debt free. This is a common misconception because, when you’re in debt, your family is most vulnerable. As you reduce debt and increase savings, you slowly begin to reduce your need for life insurance, but it is necessary to have while you work to reach those goals.
Choosing too short of a term.
Purchasing a shorter and less expensive policy may sound appealing, but it could hurt you in the long run. For example, if you buy a ten-year policy and, in ten years, you develop medical issues – that could raise the cost of your next plan. We typically recommend a 15-20 year term policy. For a family planning on having children in the future, a 30-year plan would make the most sense, whereas a family with small children that doesn’t expect to have anymore, a 20-year plan would likely meet their needs.
component makes whole life more complex than term life because of surrender fees, taxes, interest, and other stipulations.
Whole life insurance may be worthwhile if you need the cash value to cover things like endowments or estate plans, or if you have long-term dependents such as children with disabilities.