Purchasing a life insurance policy is one of the smartest decisions a person can make in terms of their well being and personal finances. Specifically, a life insurance policy can protect your loved ones and ensure they're financially taken care of in the event of your passing. Still, with so many choices out there when it comes to life insurance, it's easy to make mistakes when choosing a policy.
Buying the Wrong Kind
The first thing you'll need to decide is what type of life insurance is best for your needs. There are two different options available: term and permanent life insurance. A term policy lasts for a predetermined period of time, typically ranging from a few years to a few decades. On the other hand, a permanent policy is good for life. Permanent life insurance tends to cost more, for example, but will also allow you to borrow against your policy if needed.
Waiting Too Long to Buy
One of the biggest mistakes people make when buying life insurance is simply waiting too long to do so. As you get older, life insurance rates also tend to increase because your risk of developing a life-threatening illness or some other condition also rise. For this reason, it's generally best to buy life insurance while you're young. Unfortunately, many people assume they don't need life insurance when they're young and end up paying a lot more when they buy it later on.
Failing to Lock Rates
Ideally, you'll want to find a life insurance company that will provide you with some sort of rate-lock guarantee. This will ensure that during the term of your policy, your rates will be guaranteed to never increase. If you enter into a policy without such an agreement, you could end up disappointed when your rates increase due to a medical condition or some other change in your life.
Forgetting to Update Terms
When you first buy your policy, you'll likely be required to designate at least one beneficiary. However, it's important to revisit your policy regularly and make sure its terms match your current lifestyle. For example, if you get divorced, you'll want to make sure you remember to remove your ex-spouse as a beneficiary. And if you have children, you may also want to consider adding them to your policies. Keeping these up-to-date will ensure that everything is carried out as you desire if and when the policy needs to be used.