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Life insurance mistakes to avoid

CBS News 9/16/2022 Matt Richardson
As you embark on the life insurance process steer clear of these mistakes. / Credit: Getty Images/iStockphoto © Provided by CBS News As you embark on the life insurance process steer clear of these mistakes. / Credit: Getty Images/iStockphoto

Purchasing life insurance - or increasing the amount you already have - is almost always a sound financial decision. By making a small payment to an insurance company you can ensure that your loved ones will be protected in your absence. 

Most financial advisers recommend life insurance, regardless of your age or health. And many employers provide it alongside traditional medical and dental benefits. They even allow for discounted rates for supplemental coverage, if you should pursue it.

While life insurance types are expansive and can be tailored to your individual needs and circumstances, it can seem that this is a relatively easy personal financial decision to make. If you're currently in the market for life insurance, or just want to increase the coverage you already have, now is a good time to do so. You can start by getting a quote today.

3 life insurance mistakes to avoid

As you embark on the life insurance process, however, steer clear of these common mistakes:

  1. Underestimating the coverage you need
  2. Not comparison shopping
  3. Buying it later in life

Underestimating the coverage you need

How much life insurance you need is specific to your individual circumstances, personal financial health and preferences. There's no clear figure that applies to everyone. 

With that being said, life insurance provides a final opportunity to leave your family with monetary support. Don't discount that. If you can afford it, go with the higher amount. If you have an approximate idea of how much coverage you want, speak to a provider and get a price estimate.

If you're young and single you may not need as much insurance as you would if you're older with a family. But if you're married, you'll want enough to cover you, your spouse and any lost wages that could result from your death. If you have children you'll want to cover them, too. And if you have a mortgage - and don't want to leave your family without your income to pay it off - then you'll want enough insurance to cover that.

Factor all these considerations into your thinking when trying to determine how much coverage you'll need.

Not comparison shopping

As is the case with most personal financial decisions, you will want to do your homework to make sure you're making the right choice. Don't just accept the first low offer you get. Maybe you can get a higher coverage amount for a lower premium.

You shop around for mortgages, home and auto insurance and even student loans. Do the same for life insurance. Different providers offer different coverage. There are multiple life insurance companies to work with so it's easy to find one that works for you.

Only compare what's out there once you know exactly what you want and how much you want to pay. Do an apples-to-apples comparison to accurately gauge your offers. 

For example: If you're looking for term life insurance coverage for $250,000 from one provider, make sure you're looking for the same type of insurance for the same amount from another. Otherwise, it'll quickly become confusing.

Buying it later in life

Sometimes it makes sense to save up and delay purchases for when you have a bit more money in your pocket. 

That's not the case with life insurance. The longer you wait, the older you'll be and the more expensive you'll be to insure. Those costs will be reflected in the premiums your life insurance company wants you to pay. Each year you age the more expensive a new policy will become so it makes sense to start as early as possible.

Even if you can't afford the coverage you want at an earlier age it's better to have something in place than nothing. Particularly when you know that waiting around is not advantageous.

While this list is not a comprehensive one, it should help steer you in the right direction. If you have specific questions about coverage, what you qualify for and how much you can expect to pay, it's easiest to speak to a provider. They can answer your questions and help find a budget-friendly policy that's right for you

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