Protecting your family properly is a keystone to a sound financial house. Here are some common mistakes people make regarding life insurance ...
Mistake #1 Putting it off. The topic of life insurance is an emotional issue. Therefore, it can be easy to put off. However, if a family’s future is dependent on the breadwinner’s income, it’s crucial that families obtain the right amount of life insurance coverage to suit their needs.
Mistake #2
Relying on a company-provided plan. Many workplaces offer an employer-paid basic life insurance benefit, usually equal to one or two times a worker’s annual salary. Unfortunately, this is usually not enough. If the worker changes or loses that job, they could be left uncovered. Not all policies are portable and there is never any guarantee the next employer will provide this benefit.
Mistake #3
Thinking life insurance is too expensive. Clients may find that term life insurance rates are lower than they expect. Money Magazine reports, “If you need to buy more, term is almost always your best choice. Compared with a whole life policy, you can purchase more coverage for fewer dollars, and rates have been dropping steadily in recent years.”(2)
Mistake #4
Not buying enough coverage. How much is enough? That depends on the individual. However, many independent financial experts recommend the following rule of thumb: purchase an amount of coverage equal to six to 10 times the breadwinner’s annual gross income.(3)
Mistake #5
Not reviewing coverage. Financial experts recommend reviewing life insurance coverage every few years, or when changes occur, such as buying a house or having more children.
If it has been a while since you have reviewed your coverage make sure to dig out your policies. In the process you will put your mind at ease!
(1)Life and Health Insurance Foundation for Education.
(2)Money, March 2008
(3)INSWeb.com, viewed April 4, 2008
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