5 Common Mistakes to Avoid When Purchasing Term Life Insurance

If you have a spouse, children, or anyone in your life who might have to take on the burden of your debts should you suffer an untimely death, it’s not a bad idea to think about penning your last will and testament and purchasing life insurance. Unfortunately, many life insurance policies can cost you a pretty penny, and considering you could pay into them for years without any payoff, you might not necessarily see the benefit, especially if you’re young and healthy. The problem is that you never know what’s around the next bend. It could be a teenage girl texting while driving, never even realizing that she’s in the wrong lane as she collides with your car head-on. It could be an outbreak of E. coli at a restaurant you frequent. It could be the big C. And if you have life insurance on your side, you don’t have to worry about what will happen to your family when they lose your income and are saddled with the costs of a funeral. As it turns out, there are affordable options designed for those who don’t have a lot to spend on life insurance, and term life policies fit the bill. However, you need to make sure that you avoid common mistakes when you decide to purchase this type of insurance. Here are a few that you should know about beforehand.

1.Choosing the wrong term. The main thing you need to understand about term life insurance, as opposed to other types, is that it comes with a set term, meaning that it will, at some point expire. Of course you can renew it, but once your term is up (say, 10 years down the road) you’ll have to renegotiate the policy. What this generally means is that you’ll end up paying more for the same amount of coverage due to the fact that your more advanced age puts you at a higher risk for death. In addition, you may have developed medical conditions or other risk factors (weight gain, smoking, etc.) in the interim that will bump up your cost for coverage even further. Chances are that you now make more money than you did when you originally purchased your term life insurance policy, so you can probably afford to pay more. But you need to consider how old you will be when your term expires so that you can get the best rate for renewal down the road or hopefully bump up your income enough to afford a new or different policy.
2.Choosing the wrong coverage. It’s important to think about the costs your loved ones will face in the event of your death. Perhaps you have a mortgage you’d like to pay off. And you’ll definitely want to ensure that your family has the benefit of your lost salary for at least a year or two, if not longer. But you need to take your estimations a step further, calculating the cost of living not only for right now, but for the future of your family. In addition to compiling ongoing expenses like household bills, property tax, and other insurance policies (auto, homeowners, etc.), you probably want your kids to go to college, and you can account for that with your life insurance policy. And then there is inflation to consider. By accounting for all present and potential costs you should be able to come up with a number for coverage that will help your family to survive if you are gone.
3.Foregoing medical underwriting. You may be pretty pleased to find a policy that doesn’t require a medical exam in order to gain coverage, but selecting this type of provider is risky. Because they’ll take anyone, regardless of state of health, they may end up paying out on policies more often than the average insurer. And this cost can get spread out and passed on to their clients. This could mean you actually end up paying more, and there’s always a chance that should you suffer death the company may not have the money to pay out on your policy.
4.Failing to comparison shop. It’s important to know what your options are, and because so many companies offer term life insurance, it’s in your best interest to use a service like Select Quote term life insurance agency that offers a comprehensive questionnaire for you to fill out, plus the option to speak to a live operator. Supposing you are completely honest, the quotes you receive should be fairly accurate (although you won’t get the precise number until you take a physical exam and select the exact terms of your coverage). And this particular service will use the information you provide to match you with the company that best suits your needs, virtually doing the leg work for you.
5.Assuming term life insurance isn’t for you. There is a common misconception that term life insurance isn’t as good as, say, universal. This is absolutely untrue – it’s simply that the two types of policies offer different benefits. If you’re young and healthy but you have yet to reach your earning potential, a term life policy could save you a ton of money over other options and give you the time you need to get your life in order, protecting your loved ones and offering you peace of mind in the process. So don’t dismiss it out of hand. It could be just what you’re looking for.