Five Common Life Insurance Mistakes and How to Avoid Them

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life insurance is it needed? life insurance mistakes

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The following is a guest post by Philip J. Reed. Enjoy!

Five Common Life Insurance Mistakes and How to Avoid Them
Many people look at life insurance as a necessary evil that’s expensive and hard to understand. Others view this purchase as a bad omen that could doom them to an early end. Neither view is particularly helpful, but they do highlight the overall lack of understanding insurance faces in the world today.

The truth is that if you take a few minutes to review the various types of policies and obtain several life insurance quotes to compare prices, this valuable safety net isn’t nearly as complicated or intimidating as it sounds. To help you make the best choice, and to help you to better understand the many ways life insurance can benefit your family, here are five common life insurance mistakes, and how you can avoid them:

1. Thinking It’s Too Expensive

The economy is tough right now, and most families are watching every penny. However, this is not an area you should completely eliminate from your budget. Without this financial safety net, what would your family do if they lost the primary breadwinner? The fact of the matter is that, without life insurance, your family could be left adrift in very uncertain financial waters.  You don’t want that to happen to them, so you need to plan today.  Policies may indeed get expensive, but to find a policy you can afford, review several
life insurance quotes.

2. Believing It Can Wait

If you’re young and healthy, it’s easy to just avoid this issue altogether. After all, nothing could happen to you, right? Wrong. Tragedies happen every day, and because we can’t predict them, the only thing we can do is prepare ahead of time. Even if you’re single and without children, you should have enough life insurance to pay your burial expenses. Of course, your responsibilities and your level of coverage need to significantly increase with a marriage or children. Make sure your coverage will provide for them.

3. Underestimating Your Needs

Many people underestimate how much life insurance they really need. They may see a policy that adds up to a year or two’s salary and think that must be enough. To choose the right amount of coverage, factor in your current debts, and also the living expenses for your family for a number of years, and college tuition for your children.  

Providing for your family after you’re gone might not be the way you imagined things going, but if it comes down to that, you need to make sure they will be well taken care of.  Insurance can give you that peace of mind, and it can give your family some much needed financial security at a time when they will need it the most.

4. Assuming You’ll Be Able to Afford Bigger Payments in the Future

Some companies offer “teaser” rates that balloon over time. Many policy holders allow their coverage to lapse when the premiums escalate, leaving them without that precious coverage. Try to choose a policy with fixed rates, so that you don’t end up spending more on insurance than your family can afford, which will have the opposite of life insurance’s intended effect of keeping you financially afloat!

5. Ignoring the Details

Never buy a life insurance policy without understanding the details. Some have tight restrictions on when and how they will pay. This is especially true with cash-value policies that usually include complicated payment and return structures. We understand that details can get confusing.  That’s why it’s important to work with an agent that you trust, and one that will have the patience and understanding to help you make an informed decision.


According to one of the top insurance research firms, LIMRA, life-insurance ownership has dropped to the lowest point in 50 years. This means that 35 million Americans, or 30 percent of the population, have no coverage at all. Don’t let your family go unprotected in these hard economic times. Compare
life insurance quotes, and find the correct policy for you and for your family.  After all, ignoring life insurance totally can easily turn out to be mistake #6.

How about you all? Do you currently have life insurance? If so, how did you go about figuring out how much coverage to obtain? If not, why do you feel it is unnecessary? 

Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

  • Personally, I have not yet in life had to deal too much with the considerations involved in obtaining a life insurance policy. This is due to the fact that I am not yet married, have no children, and I am confident that while my relatives are not rich by any means, they could no doubt pay to have me buried if the need arose. Because of these considerations, I do not feel that I need life insurance currently.
  • In my first job out of undergrad, there was a default, no-charge-per-month life insurance policy that was equivalent to one year’s salary (likely to cover burial expenses) that I had while working there, but that’s the extent of my experience (sorry to say). 
  • @ The question of if you actually need life insurance?
    • While I think that all of the mistakes and corresponding considerations listed above are very logical and well thought out, I would first encourage readers to take a good hard look at their situation PRIOR to jumping quickly in to buying life insurance. You should ask yourself very seriously, “Is life insurance something I need?”
    • If your situation is similar to mine, despite how low-cost a policy would be, I simply don’t think that I need to have life insurance until I have children. 
    • I explored this topic of if I should buy life insurance earlier than required in life at the following link, if you’re interested in reading – Should I Buy Life Insurance Even Though I Don’t Need It?

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  1. dividendsforthelongrun says:

    I pay the full $27 per month to get the maximum amount of SGLI coverage through the Army. Before I deployed (and admittedly not knowing very much about life insurance) USAA offered me an additional policy and waived the doctor's visit requirement (I was just a week away from deploying). The result is I have coverage equivalent to about 10 years of my yearly income right now…but what it really means to me is I need to learn more about life insurance!

    • I'm definitely with you on this one Dividendsforthelongrun!

      I know very little about life insurance also. But, I suppose it makes sense since I've only looked in to life insurance enough to know that I don't need it since I don't have a family/anyone who depends on my income right now except for me.
      My recent post Easy Like Sunday Morning Weekly Recap and Roundup – # 5 – December 17th, 2011

  2. I took out term life insurance on my wife and myself for 10 times each of our annual earnings.
    My recent post Are You Obsessed with Goals?

    • Thanks for sharing Krantcents. Is the 10X annual salary/earnings a common amount for life insurance? Dividendsforthelongrun mentioned that in their comment above as well.
      My recent post Easy Like Sunday Morning Weekly Recap and Roundup – # 5 – December 17th, 2011

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