Not having life insurance is a risk.
When, not if, you die, your loved ones will receive only what you own today. If that is enough to help them pay bills, meet their financial goals, put them through college or maintain their current lifestyle, then you may not need life insurance. If not, is it a risk you want your family to take? This is especially true in an economy like today when real estate values are down, and the stock market is unpredictable. Your dependants and loved ones most likely need for you to have life insurance.
Five life insurance blunders to avoid. *
1. Buying the wrong amount.
A rule of thumb is to have 5 to 10 times your annual salary but that might still not be enough if you have young children. The amount as a lump sum on paper might look substantial, but it might not add up to enough when compared with a consistent salary spread over many years.
2. Do not trust just any insurance agent.
Do not limit yourself to an insurance agent that only works with one life insurance company. Instead, work with an independent broker who can shop around on your behalf.
3. Do not be cagey.
Many people would rather not talk about their life insurance. But if you do not tell your beneficiaries about your life insurance, including what company issued the policy, they might never receive the death benefit when you die. All too often, survivors simply do not know about the deceased's life insurance and never make a claim.
4. Do not forget that the world goes on.
One of the hardest things for life insurance policyholders to realize is that they will no longer be around when the insurance pays. The purpose of life insurance is not to protect the insured but rather the surviving family members who will have ongoing expenses, including increased expenses. For example, if your spouse's health insurance is paid for by your employer, your spouse will have to pay for it after you die. If you have children who will someday be going to college, the cost of college will be dramatically higher 10 years from now. Plan accordingly.
5. Do not depend on employer insurance.
A lot of people have a false sense of security from the fact that they have life insurance through their employer. Quite typically though, employer policies are inadequate in amount and end when your employment ends.
* Life insurance blunders According to Alex Halperin in a 2007 article in BusinessWeek.
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