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Life Insurance: 4 Key Mistakes And How To Avoid Them
By: Evan Davis
Life insurance, whether you are talking about whole life, term life, or one of
the many policy variations available, can be a complicated and misunderstood
subject. Perhaps for this reason it is not unusual that we make wrong decisions
when purchasing a life insurance policy. With that in mind, we would like to
bring up what some experts consider to be the four most common mistakes made
when purchasing life insurance.
First, treating your life insurance policy as a savings account. Insurance is
often purchased for two reasons, tax savings and as an investment instrument.
Many experts believe that life insurance is best purchased to do what it is
intended to do, which is provide protection in the event of loss of life. For
this reason we suggest, as do many insurance experts, purchasing a term policy
for life insurance, and for savings purchasing a separate mutual fund account.
Granted, this view is somewhat of a purist viewpoint and will not be for
everybody. Still, term policies are relatively inexpensive, free of
complexities, and payout quickly.
Second, allowing your agent to make all of the decisions. Do your homework and
understand what you are buying. We urge you not to trust your agent too
completely–regardless of how honest or well intentioned you believe him or her
to be. Your agent may be a model of intelligence and integrity, but the ultimate
responsibility for any decision made rests with you; don’t give someone else all
the power.
Third, treating the purchase of life insurance as a one-time–purchase-and-forget-about-it–activity. Your needs will change over time. As your life circumstances change, so will your insurance needs. For example, the sort of policy you buy as a single individual will not provide adequate coverage should you decide to marry and start a family.
Fourth, buying the wrong kind of insurance. Yes, this is an all too common
mistake. For example, many people buy universal or variable life insurance
policies without properly understanding the kind of insurance they’ve bought and
that these are complicated investment instruments. This sort of purchase might
be completely wrong for a single person whose income would not allow premium
payment in the event of unfavorable market fluctuations.
When buying life insurance, be sure to take the time to do your research. It
isn’t necessary to spend sleepless nights in the library. However, it is
important that you thoroughly understand your needs and which sort of life
insurance will offer the best protection with respect to the demands of your
life. There is a great deal of concern about finding the cheapest, or lowest
cost life insurance. But one action you can take to insure you get the lowest
premium price for your “life” is to put in the time to learn how to make an
informed decision about the life insurance that will serve you best.
About the Author:
Evan Davis works in Medicare customer service and is the webmaster and owner of
Value Life Insurance. Find out about cheap term life quotes online and low cost
term life premiums at www.a2b-life-insurance.info and www.a2b-life-insurance.info/alerts/ |
