Don’t make these life insurance mistakes.
While most people know that they need life insurance to care for their loved ones, that’s where their knowledge ends. Unfortunately, this lack of understanding leads many people to make uninformed coverage decisions. To ensure that you don’t fall into the same trap, make sure you avoid these common life insurance mistakes.
- Failing to Secure the Right Amount of Coverage
One of the most common life insurance missteps is buying too much or not enough coverage. If you do not have anyone else depending on your income, then you probably don’t need very much coverage at all. However, if you have a family and are the main breadwinner, then you will need a considerable amount of coverage—at least seven times your annual salary. If you are a stay-at-home parent, you do not need as much coverage as your family’s breadwinner, but you do need to carry enough coverage to pay for childcare, housekeeping, and other services that you normally handle.
- Choosing the Wrong Type of Policy
There are two main types of life insurance, term and permanent. Term life policies offer life insurance coverage for a set amount of time, usually 10-30 years. During your term, you will pay your premiums and, if you pass away, your beneficiaries will receive a pre-determined payout. Permanent life insurance policies offer life insurance coverage that spans the entirety of your lifetime. As you pay your premiums, your policy develops a cash value that grows over time. You can borrow against your policy’s cash value as a quick way to secure emergency funds. Because permanent life insurance policies are more complicated to manage and more expensive, term life policies are usually the best option for families. Permanent life insurance policies are better suited for wealthy individuals looking for an investment opportunity or people with a lifelong dependent, such as a child with special needs.
These are two of the common life insurance mistakes that you need to watch out for. Do you have additional questions about your life insurance or other personal coverages? If so, then contact the experts at Promised Land Insurance Group today.