If you are looking at canceling a policy, you may want to think about these 7 potentially dangerous mistakes individuals make with their life insurance before you do.
1. "I'm all prepared for life insurance!"
According to a contemporary survey of middle income Americans, most respondents felt that folks should have some term life, but believed that it should only be sufficient to cover existing financial debt and funeral costs. Surprisingly, only about 20% felt that term life insurance should compensate the salary of the deceased for the surviving family's sake.
In fact, owning a life insurance plan that is equivalent to seven to ten times one's present salary is the minimal recommendation for someone with young little ones.
2. "Life insurance? I'd rather not talk about it."
For almost all people, thinking about death is more than tiny distressing. Yet, many people do want to make sure their family members are financially comfortable after their passing.
Locate a couple of minutes to sit down with your significant other and ask the question, "How would you and the kids make it if I were to pass away?" It is important to answer this subject at this point.
3. "My dad told me to have coverage comparable to 7 times my salary."
In today's culture, that is not as reliable of a measure because of the different life circumstances found today. Many qualities that were not so common 50 years ago can be found openly today. An unmarried person with no dependents has much less of a requirement for insurance than the family with a stay at home spouse and 4 young youngsters.
A more precise approach is to make a list of the things that you want to protect. How will your better half manage the home mortgage, taxes, utilities, put food on the table, maintain the car, and many others?
4. "I never thought of that."
Benefits such as health insurance, pension accounts, youngster care credits, etc. all cease at the death of an employee. The question that needs to be asked then is, " If I die, that subsidy disappears. How will my loved ones pay for health-care after I'm gone?" Part of the response 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 too busy to worry about life insurance now."
It's not hard 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 intend that your kids will be "dependent" until age 25 due to college and finding a career. If your youngest is 10 at present, you would want to have at minimum a 15 year policy to cover that risk period.
6. "It's too expensive."
That is a huge error in thinking, as it is possible to find a plan that fits your needs and your budget. Today, term life insurance is much more affordable than permanent insurance, and is the perfect instrument for dealing with your financial risk.
7. Bought it and forgot it.
Are you the same individual now that you were 5 years ago? If we are candid the reply is, "No." Maybe there have been some changes to your lifestyle such as getting married, having kids, buying a house, etc. These crucial life events are exactly why you should go over your life insurance policy at regular intervals to make sure that your policy covers your "new" situation.
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