Buying life insurance is tricky and it often seems like a tedious task. You have to research options or develop at least a basic understanding of life insurance policies, coverage, and other aspects to make an informed choice.

Moreover, the insurance market is broad and confusing; so, you have to compare different insurance options before purchasing a policy as you would do before buying a computer or TV.

As you learn more, you will find many different insurance carriers with policies designed to meet various customer needs. These include insurance riders like death by accident, critical illness like cancer, or heart attack.

However, the hardest part is determining the best life insurance option for your financial situation. And, it is a common area where many people make mistakes.

In this post, we will discuss seven common mistakes that you should avoid before buying a life insurance policy.

8 Common Mistakes to Avoid While Buying Life Insurance

Buying life insurance requires careful research as making the wrong purchase can cost you a lot in the long run. Here are 8 mistakes that you should avoid when buying a life insurance policy.

 

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1. Assuming you can’t afford life insurance

Nearly half of young adults think life insurance premiums are 500% more expensive than they actually are.

If you think you can’t afford life insurance, you may be wrong. Whether you are just getting starting in your career or growing a family, you can’t afford to let your loved ones suffer in case of an accident.

According to the Insurance Barometer Study, 60% of millennials ages 18 to 34, believe that paying for Internet, cable or cell phone service is more important than buying life insurance, and 29% would rather save for vacation than pay insurance premiums.

The statistic above gives insight into the fact that most young people don’t see buying life insurance as a priority. But, when you get a policy in your 20s or 30s, it lets you lock in low insurance rates for decades to come.

For example, let’s say, you choose a $300,000 life insurance policy. Many people might think that it cost at least $2,000 per year. In fact, in your 20s or 30s and in good health, you can usually get such a policy for under $200 per year.

 

2. Not understanding what you are buying

A lot of confusion arises when trying to understand life insurance.

The two most common types are term life and permanent life insurance. A term life insurance covers you for a fixed number of years (usually 10, 20, or 30 years). It is the least expensive form of insurance.

Permanent life insurance covers you for a lifetime. One common type of permanent insurance is whole life. Whole life insurance guarantees a fixed payout upon your death. In addition, it includes an investment component that generates a rate of return over time. As a result, it is often more expensive than term insurance.

Be sure to ask a lot of questions when buying a policy and make sure you understand what you are buying.

 

3. Not comparing rates online

Another common mistake people make is not comparing life insurance policy rates online. Did you know that some carriers can charge 2-3 times more for a nearly identical policy? By comparing rates, you can save a serious amount of money.

You will see more options by comparing different types of policies and companies. Some carriers specialize in difficult to insure cases, while others may focus more on younger adults.

 

4. Relying on your employer’s coverage

When it comes to life insurance, relying on your employer’s coverage another common mistake. Do you think that the life insurance coverage your employer is enough to cover your family’s expenses? Many employer policies only cover between $10,000 to $100,000 in coverage.

Moreover, your employer’s insurance coverage does not follow you when you change jobs. So, you may end up having to purchase additional insurance coverage at a higher rate when you change employers.

 

5. Not buying enough insurance

If you are the primary income earner for your family, you will likely want more life insurance coverage than a dual-income household. Otherwise, your family may suffer a financial crisis in case you pass away. When buying life insurance, start by reviewing your liabilities and outstanding debts. This may include things like loans, credit card bills, mortgages (including mortgage insurance), and other monthly expenses.

Apart from this, consider priorities like your children’s education or helping with a down payment for their first home. These expenses should also be considered when calculating your life insurance coverage needs.

 

6. Assuming your health will get in the way

If you are in poor health and think life insurance is too expensive for you, think again. The reality is, you can still get life insurance even with poor health.

One type of policy you can consider is no medical life insurance. This type of policy does not require a medical exam or disclosing some of your health conditions. While more expensive than traditional insurance, it can still be within your budget.

Some carriers overlook specific health concerns like diabetes or a family history of cancer. Your life insurance broker can help you to navigate the different options available.

 

7. Not preparing for a medical exam

When applying for life insurance, at some point you will likely complete a medical exam. This is part of the insurance underwriting process. The purpose of this exam is for the carrier to better understand who they are insuring. You should take the exam seriously because the results may affect your life insurance coverage and premium rates. If you are lead an unhealthy lifestyle, you will likely end up paying higher rates (including higher premiums for smokers).

Around 50% of consumers say that a medical exam requirement makes them less likely to buy life insurance.

Consider living a healthy lifestyle at least a few months before completing your exam.

We recommend you to follow some healthy lifestyle tips. This can include healthy eating, drinking a lot of water, cutting alcohol and smoking, getting nice sleep, and staying physically fit.

If all else fails, you can always purchase life insurance, limit unhealthy habits (like smoking), and re-apply in 12 months to see if you qualify for a lower rate.

 

8. Waiting too long to get life insurance

Waiting too long is the reason why 40% of the people who are insured wish that they had purchased life insurance at a younger age.

On the flip side, if you get a life insurance policy with enough coverage in your 20s, the benefits are huge. The changes in you passing away are very low in your 20s and you are likely to have fewer health-related problems. As a result, you can secure life insurance at lower monthly premium rates. Thus, it pays to get insured as early as possible

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