Life insurance is crucial to providing a safety net for your loved ones in the event of your death. Understanding the do’s and don’ts of life insurance ensures that you make informed decisions that align with your financial goals and family’s needs. Here are five things to make sure of and five things to avoid when it comes to life insurance.
- Assess your needs and goals. Before purchasing life insurance, evaluate your financial needs and long-term goals. Consider factors such as your family’s lifestyle, outstanding debts and future expenses like education and mortgages. Understanding your financial situation will help you determine the appropriate coverage amount.
- Regularly review and update your policy. Life is dynamic, and your financial situation may change over time. It’s a good habit to regularly review your life insurance policy and make changes accordingly that align with your current needs. Major life events such as marriage, the birth of a child or a significant career change may warrant adjustments to your coverage.
- Choose the right type of policy. Life insurance comes in various forms, including term life, whole life and universal life. Each type has its advantages and disadvantages depending on your individual circumstances. Assess your needs and preferences to choose the policy that best fits your financial objectives. Term life insurance may be suitable for temporary needs, while whole life offers lifelong coverage with additional investment features.
- Disclose all relevant information. Honesty is key when applying for life insurance. Provide accurate and complete information about your health, lifestyle and medical history, as failing to disclose relevant details can lead to complications during the claims process, potentially resulting in the denial of benefits.
- Consult with a professional. Speaking to an insurance professional will allow you to receive personalized advice and get a better understanding of your options. They’re also the right person to give expert guidance on policy features and comparisons.
Schedule an appointment with a AAA life insurance agent.
- Assume it’s too early to think about life insurance. Procrastination can be detrimental when it comes to life insurance. “No one has a crystal ball and can predict what lies ahead for themselves or people they care about,” advised Todd Anthony, life and annuity insurance specialist with AAA Northeast. The younger and healthier you are when you purchase a policy, the lower your premiums are likely to be. Waiting until later in life can result in higher costs and potential health issues that may affect your insurability.
- Underestimate your coverage needs. It’s important to adequately estimate your coverage needs to ensure your loved ones are financially secure in the event of your death. Underestimating the amount can leave your family vulnerable to financial strain. “All too often people put off buying the protection they need, and a tragedy occurs, and [then] it’s too late,” said Anthony. “Be proactive, explore your options and take action if it’s necessary to do so.”
- Lapse payments. Failing to pay your life insurance premiums can lead to a lapse in coverage. If this happens, you may lose the benefits you’ve been paying for. Set up automatic payments or reminders to make sure you stay current on your premiums and maintain continuous coverage.
- Rely solely on employer coverage. While employer-sponsored life insurance is a valuable benefit, it may not be sufficient for your needs. Only having this coverage can leave you underinsured, especially if you experience a change in employment. Consider supplementing employer coverage with an individual policy to provide comprehensive protection.
- Overlook policy exclusions and limitations. Life insurance policies have exclusions and limitations that specify situations where benefits may not be paid. It’s crucial to understand these terms and conditions to avoid surprises during the claims process.