The reasons for buying life insurance vary from person to person, but in essence, it provides peace of mind. If you’re thinking about buying life insurance, you want to avoid costly mistakes that can affect your family or other beneficiaries later on.
Whether you recently married, had a new baby, or bought a home, buying life insurance is a great way to protect your family and home. The last thing you want is for something to happen to you to leave your family unprepared financially.
Life insurance provides reassurance that your family will be protected from financial hardship if you pass away. One of the purposes of life insurance is to replace the income they would lose in the event of your death. It will also help with any outstanding debts that need to be paid. For these reasons, it is vital to choose your policy carefully.
Types of Life Insurance: How Are They Different?
The first choice you’ll need to make is the type of insurance policy. Insurance companies offer two basic types of coverage: (1) Permanent Life and (2) Term Life.
- Permanent Life Insurance – Also known as Whole Life, this type of insurance lasts your entire life. It also offers a cash accumulation benefit that you can borrow from. A Permanent Life Insurance premium is more expensive than Term Life policies, but the added benefits justify the extra cost.
- Term Life Insurance – This type of insurance provides coverage for a set time such as 20 years. Premiums are lower than those for a Whole Life policy. However, when the time limit expires, you’ll need to apply for new coverage, if you choose to do so. The downside of Term Life Insurance is that getting new coverage after the policy expires will be more expensive
What to Avoid When Buying Life Insurance
Before you purchase life insurance, consider the following tips for buying life insurance. They may help you avoid common life insurance mistakes that could jeopardize your family’s future financial well-being.
#1. Waiting Too Long to Buy Insurance
Cost is an important factor when buying life insurance. However, if you wait until later to get life insurance the rates will increase. This happens because the premiums are based on your age and overall health. In fact, some health problems may make you ineligible for life insurance. Buying life insurance while young and in good health is the best option.
#2. Looking for the Cheapest Rate
Looking for an affordable policy is fine, as long as you don’t compromise on coverage. For instance, term life insurance is cheaper than permanent life, but coverage ends at a preset date. Your financial situation and needs will determine which type of coverage is best. Keep in mind that saving a little money now may not be worth what you’ll be giving up.
#3. Late or Missed Payments
The coverage term can be affected by missed or late payments with some types of policies. For instance, Universal Life Insurance is a type of permanent life insurance that provides guaranteed protection at low rates. However, if your policy guarantees coverage to age 100, it can drop to age 92 if you miss a payment.
Other insurance policies can be canceled if payments are late or missed. If you think you’ll miss a payment or will be late, contact the company right away. Some companies allow 30 to 60 days to catch up with the payment.
#4. Ignoring Its Investment Potential
The idea of starting a savings account may seem more appealing than purchasing life insurance. The problem with that option is that a savings account is easy to dip into. You will be tempted to use the money for an emergency, thinking you’ll replace it later. But, with a life insurance policy, the money you invest monthly guarantees that your family will have the funds it needs if you die. It is an investment in your family’s future.
#5. Borrowing Too Much From the Policy
The accumulated cash value of Permanent Life Insurance can be accessed for loans. Although this is an advantage, the money you borrow decreases the amount of payout to your beneficiaries when you pass away. Borrowing from the policy may also involve some unwanted tax liabilities.
Life insurance is complicated and it’s difficult to know which policy is best for your financial goals. Hopefully, these tips for buying life insurance will be helpful. But, before making a decision, reach out to an insurance expert for advice just in case.
Sandifer Insurance Agency Will Help You Get the Right Life Insurance
When you turn to us for your life insurance needs, you’ll benefit from our 40 years of experience in the insurance industry. Our skilled agents will thoroughly assess your needs and goals to find the best coverage at an affordable rate.
Sandifer Insurance Agency is a family-owned, local company that proudly serves Cheraw, SC, and surrounding areas. We work with the top insurance providers to ensure our customers get quality coverage with a trustworthy company.
Reach out to us by phone, email, or online if you want help choosing the right life insurance for your family’s needs.
Sources:
- https://www.doi.sc.gov/1018/Understanding-Life-Insurance – Understanding Life Insurance