We don’t like to think about that unexpected end. While it might be a fact…
Life insurance is a topic that not many talk about. Whether it be avoidance of the subject for fear of the worst, or just an unnecessary expense that is pushed to the side, the discussion is one that probably won’t make it to the dinner table. Chances are if you’re reading this, you’re trying to learn more on the subject. We’ve put together the top 3 most common mistakes people make with life insurance.
Number 1 – Not having life insurance at all
While it seems like an “unneeded” expense to many, life insurance can become something very important in a matter of moments.
Take a minute and think about the loved ones in your life. Are you the primary source of income for them and the household? What would happen if you were gone and there was no more income? In addition to the emotional toll that a death can have on a family, the loss of income that is used to provide basic items like food, electricity and a home can make the time even more devastating. Not to mention, with the average cost of a funeral pushing upwards of $10,000, there are many things that a quality life insurance plan can assist in covering.
An exercise that helps to put things into perspective is “playing dead”. Consider everything that you currently provide for on a monthly basis. Then subtract your income from the equation. Can your family or loved ones still cover these expenses without you? Remember, it’s extremely important to get life insurance sooner rather than later since the cost typically increases exponentially as we age.
Number 2 – Relying on life insurance provided by your employer
Many employers today offer or provide life insurance to their employees. While this is wonderful, it’s important to remember that these are typically basic, starter plans. Depending on your needs, the plan can usually be added to or an additional life insurance plan can be sought out by another company. This will help make sure that all your bases are covered.
Number 3 – Only choosing a term life insurance policy
A term life insurance plan will provide a “survivor” benefit. This is the amount that the beneficiary receives if you pass away, over a specified period of time. 15, 20, or 30 year increments are most common among these policies. An alternative solution would be to choose cash value life insurance. This type of policy still provides a death benefit, should you pass away. But it also grows over the years as long as you continue to contribute to the policy. In addition, this type of life insurance plan can help with financial obligations in a tax-advantaged way. A cash value life insurance policy is typically more expensive, but make a lot of sense if you can commit to funding it on a regular basis.