If you are thinking about canceling a current policy, you may want to evaluate these 7 slipups individuals make with their life insurance before you do.
1. "I'm all prepared for life insurance!"
According to a contemporary survey of medium income Americans, most respondents felt that people should have some life insurance, but believed that it should only be adequate to cover existing overall debt and funeral costs. Surprisingly, only about 20% felt that term life insurance should compensate the earning potential of the deceased for the surviving family's sake.
After all, having a life insurance policy that is equivalent to seven to ten times one's existing salary is the smallest advice for someone with young little ones.
2. "Life insurance? I'd rather not talk about it."
For many individuals, planning about death is more than a little uncomfortable. Yet, many people do want to make sure their close family are financially stable after their passing.
Locate a couple of minutes to sit down with your better half and ask the question, "How would you and the kids make it if I were to pass away?" It is vital to handle this question at this point.
3. "My father told me to have coverage matching to 7 times my income."
In today's culture, that is not as beneficial of a measure because of the different life situations found today. Many dynamics that were not so common 50 years ago can be found readily today. An unmarried person with no children has much less of a requirement for insurance than the family with a stay at home spouse and 4 young young children.
A more appropriate method is to make a list of the details that you want to protect. How will your partner manage the mortgage, taxes, utilities, put food on the table, maintain the vehicle, and many others?
4. "I never thought of that."
Benefits such as health insurance, pension accounts, child care credits, etc. all cease at the death of an employee. The subject that needs to be made then is, " If I die, that subsidy disappears. How will my family pay for health-care after I'm gone?" Part of the answer of course is to make sure your term life insurance policy will pay enough cash to cover the new health insurance bill.
5. "I'm way too busy to worry about life insurance now."
It's not difficult to lose sight of the long term view when we are so consumed with handling our day to day lives. A general guideline is to plan that your kids will be "dependent" until age 25 due to college and finding a profession. If your youngest is 10 today, you would want to have at least a 15 year policy to cover that risk period.
6. "It's too expensive."
That is a huge blunder in thinking, as it is possible to find a plan that fits your needs and your finances. Today, term life insurance is much more affordable than permanent insurance, and is the perfect instrument for operating your financial exposure.
7. Bought it and forgot it.
Are you the same person now that you were 5 years ago? If we are honest the reply is, "No." Maybe there have been some changes to your way of life such as getting married, having kids, buying a house, etc. These fundamental life events are exactly why you should take a look at your life insurance policy at regular intervals to make sure that your policy covers your "new" situation.
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