Biggest Life Insurance Mistakes (Part 3 of 3)
This blog post is part three of a three part series. Part one and two can be located in the blog archives at www.mceachernfinancial.ca/blog
For most people, buying life insurance is difficult enough, even when it’s done right. But when it is done with only one eye open, or haphazardly just to ‘get it over with’, mistakes are very common, and they can be very expensive. Without question, life insurance is one of the most important purchases people make in their lifetimes, yet many people are ill-equipped to make informed decisions. Consequently, many life insurance owners express doubt, or even remorse, over their purchase. By avoiding some of the biggest mistakes that people make when buying life insurance, you can be more assured of your purchase and enjoy its peace of mind.
Mistake #3 – Buying the Wrong Kind of Policy
With life insurance, you have many choices that can work in your favor if you recognize the importance of matching the type of policy to your specific needs and wants. The mistake many people make is to follow the advice of someone who knows little or nothing about their situation. You might read an article about why everyone should just buy term life insurance because it is the cheapest; or you might get an earful from a colleague who is raving about his variable life insurance plan. Your life insurance solution should stand on its own based on your needs, preferences, and priorities. A professional life insurance advisor will be able to guide you, and more accurately assess you specific needs.
Term life is an excellent choice for people are prescient enough to know when their need for life insurance will cease to exist. For people who are on a financial track that will ensure that they will accumulate enough of their own assets, the need for life insurance may diminish over time. A tragic mistake that some people make is buying term because it can save some money currently only to find that their need for protection continues after the policy expires. They could find themselves in a situation where they need to repurchase some life insurance, but they can’t get it because they aren’t insurable (perhaps because of age or health concerns), or because it too expensive.
Permanent life insurance is also not necessarily for everyone either, as it is typically a more expensive solution in the beginning. But, for people who recognize that their need for protection is likely to continue beyond 15, 20 or even 30 years, it can be a much more cost effective way to own life insurance for the long-term. The cash value growth in some permanent policies is not only way to accumulate savings, but also it can be applied to pay for the premiums at some point, so the policy can become self-perpetuating. With permanent life insurance, the same life insurance you bought to protect your young family will remain available to protect a family business, supplement your spouse’s income, protect your surviving spouse’s retirement income against investment losses, or cover the cost of your funeral expenses.
There are many different types of permanent life insurance plans, such as whole life, variable life, universal life, variable-universal life. Each has features and characteristics that can benefit people in different situations. It is well worth your while to thoroughly review each of the different policy types with the guidance of an independent life insurance professional to determine which would best suit your needs and the needs of your family.