Since you don’t buy life insurance often, you might not know what to do or how to avoid the traps. You’re buying today to protect a future self you’ve never met, and the benefits don’t go to you either. Who wants to contemplate their own death?
Here are some things you should do:
Do get the right amount of coverage for:
- Today (if building an estate): your biggest need is now if you’ve got a mortgage and young children. You might want Term 20 but need to compromise by getting Term 10 instead. Or by getting Term 20 instead of Term 30. That’s okay. Additional insurance will cost more in the future but you may be more able to pay.
- Tomorrow (if estate planning): as your estate grows, you’ll need more insurance for the taxes and expenses at death. Instead of buying the right amount for your current liabilities, project the value of your estate when taxes are due. If you’re single, that’s at your death. If you’re married, that’s at the time of the second death. Consider a fee-only financial planner for objective advice.
Do get the right term. Say you buy Term 10 and a few years later see you need coverage for longer. Your insurance will likely renew but the new premiums may shock you. When your need changes, review your insurance and see what updates would help with your new future.
Do shop around. Comparing prices is easy online but there’s more to insurance than the price. You may need advice. Offline you can compare advisors until you find the right for you. Your advisor can then do the shopping and answer your questions.
Here are a few tips on what not to do:
Don’t assume you can wait. You don’t know what could happen before you’re ready. You can’t buy at just the right time unless you want to pay extra for a product with simplified underwriting. Regular life insurance usually takes weeks to get.
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Don’t answer questions incorrectly. That’s fraud and makes your insurance invalid. Your application forms part of the contract. Your beneficiaries lose you and the death benefit.
Don’t buy on price. While price matters, getting the death benefit paid is more important. A company with an unusually low premium could compensate by being tougher at claim time or you may lose out on guarantees or features that you wish you had later.
Procrastinating is easier than making decisions about your life insurance. Do something. Don’t do nothing.
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