Life Insurance Purchasing Mistakes to Avoid
September 1, 2020
SEPTEMBER 3, 2020: Life insurance is meant to provide some financial security for your loved ones when you die. Depending on your situation, the money may be needed to help pay off debt, fund your spouse's retirement, or help pay for a child’s education. There are different types of life insurance plans to choose from. If you don't know what you need or understand the difference in the types of plans available, you are open to mistakes.
Choosing the Wrong Type of Policy
There are two basic types of life insurance to choose from: term and permanent. Term policies pay out a specific benefit and remain in place for a set period of time. Term life insurance is usually purchased for a specified length of time usually 10, 20, or 30-years. You are covered only during that time period.
Permanent life insurance, referred to as whole life on the other hand, stays in effect throughout your entire life. A whole life insurance policy lets policyholders build cash value.
When deciding between the types of coverage, you'll need to assess what life stage you may be in and the amount of coverage you may need. Are you on your own? Do you have a spouse and children that will need financial security if you are not there to provide for them? Are you looking forward to retirement? Do you need to cover your business needs if you are no longer in the picture? Compare your needs against the costs of the policy. If you have limited funds and only have short-term debts that need to be paid, a term policy may work. If you need to provide financially for your family for a much longer period, then a whole life policy may be best.
Underestimating Life Insurance Needs
Step one is to decide how much of a death benefit you need. Do an assessment of your debt, future needs of your family and any other factor that may come into play after you are gone. Don’t run the risk of selling your beneficiaries short in the future.
Focusing on the Price
Ever since the spread of COVID-19 hit the United States, people have been thinking about life insurance and reassessing how much coverage they really need. Like any other type of insurance, figure out how much you can afford and how much you need. Most plans require underwriting which will take your health, lifestyle, and hobbies into consideration when calculating your rate. The higher the risk the higher the rate
Also, make sure to review the different policy options - called riders.
You may think the cost of buying life insurance is too high and you can’t afford it. Or you could be tempted to reduce the coverage amount to a lower premium rate. But life insurance is not something that you should skimp on.
Looking at your out-of-pocket costs is an important feature when deciding which plan to choose. However, choosing a policy solely based on the cheapest premium cost could be a mistake. You'll need to think about whether the money you're saving is worth the impact it could have on your family if something happens to you.
All in all, once you decide on a life insurance policy, take the time to review it regularly to make sure it still fits your needs. Knowing that you have the right life insurance coverage in place provides peace of mind for you and your loved ones.
About National Catholic Society of Foresters
At National Catholic Society of Foresters, we pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs.