Avoid These Mistakes When Buying Life Insurance

Life Insurance PolicyAround 35 million U.S. households have no life insurance coverage, according to a 2010 study by industry research group Limra, and more than half of American households say they need more.

But life insurance policies can be complicated.

Terms and riders make the purchase of even the most straightforward policy a challenge to many.

Following are ways to avoid five mistakes when buying life insurance:

Don’t Procrastinate:

You may think you can get away with postponing your purchase until you’re older, but then you may also be sicker, and being sicker will make your policy cost more or maybe even prevent you from getting coverage at all. So look into life insurance now, when you’re in good health and can easily pass an insurer’s medical exam.

Don’t Lie:

If you smoke or have a medical condition, be sure to be open about it. It might cost more, but not telling could cost you coverage when you need it most.

Don’t Forget About Your Spouse:

Life insurance policy isn’t just for your kids. A life insurance policy should provide your spouse money in the event of your death too. That’s because if you die, without your income, your spouse’s lifestyle could change drastically.

Don’t Let the Policy Lapse:

It’s tempting to forgo a life insurance policy when your household budget is tight, but it’s a bad idea. In addition to needing life insurance, it’s also a financial mistake, depending on the type of insurance. For example, generally the surrender or cash value of a whole-life policy won’t equal the premiums paid until 12 or 15 years have passed.

Don’t Forget to Do the Math:

Determine how much money your spouse and children would need if you weren’t around, by taking into account your lost income and any debts such as mortgages and major expenses that are pending, like college tuition.