7 Mistakes People Make When Shopping for Life Insurance

 When you purchase life insurance, you’re getting important protection and peace of mind for yourself and your family. You’ll want to make sure you make the right choice so you have the coverage you need. 

September is Life Insurance Awareness Month, so it’s a good time to review your situation and make sure you have the best protection in place.

Mistakes to Avoid When Shopping for Life Insurance

Here are some common mistakes to avoid when you’re shopping for life insurance.

1. Getting the Wrong Type of Policy

As you figure out how to shop for life insurance, you’ll quickly realize that there are many different types of policies. They vary based on how long the policy lasts, whether the premium or benefits can change and if they build cash value.

The two main types of life insurance are:

• Term life insurance, which is less expensive and covers a set period of time. 
• Whole life insurance, which is more expensive, but covers you for life and builds cash value.

The type that’s right for you will depend on your needs, future plans, preferences and financial situation.

2. Waiting Too Long to Buy Life Insurance

If you’re young and single, buying life insurance might not be a priority. But if you plan to have a family or expect that people will rely on your income in the future, you may want to look into life insurance sooner rather than later. 

Life insurance policies are less expensive when you’re young and healthy, as that’s when you’re in a better position to lock in a low rate for the life of the insurance policy. For example, a 30-year-old nonsmoking woman might pay $276 a year for a term life policy. A 50-year-old in the same circumstances may pay $576.1 Our life insurance calculator can help you determine how much coverage may cost.

3. Relying Only on Group Life Insurance

You might have group life insurance through your job, an association or a union. This type of life insurance is usually inexpensive, and it might even be free to you as part of a benefits package. You don’t need to qualify or have a medical exam to get it. 

Group life insurance is nice to have, but it may not fully meet your needs. Plus, this insurance doesn’t move with you when you leave a job like insurance you purchase on your own does. 

4. Focusing Only on the Premium

Getting the most value for your money doesn’t mean buying the cheapest policy. Many factors play into how much life insurance costs, and riders may make it highly customizable. It’s a good idea to work with an insurance agent or financial advisor to make sure you get the coverage that’s right for you and your family, now and in the future.

5. Being Underinsured

When you buy life insurance, you’ll probably be looking at some big numbers. But you need to dig in and see if they’re big enough. Your family may need income to pay off a mortgage, cover the cost of college education and manage everyday household expenses. Do the math and make sure you have enough coverage.

6. Not Considering Term Life Insurance

Some people consider term insurance to be a waste of money, since it’s not guaranteed to pay out and it doesn’t have cash value like some whole life insurance policies do. But term life insurance can be an affordable option to cover a set period, such as your working years, the time until a mortgage is paid off or while your children are dependents. 

7. Expecting Life Insurance to Be Your Retirement Nest Egg

Permanent life insurance can build cash value, and you may be able to borrow that money tax-free. You’re effectively borrowing from yourself, and money you don’t pay back comes out of your death benefit. 

While using your life insurance to fund your retirement is an option, you could purchase term insurance, which is cheaper, and invest the difference in another type of account.  A financial advisor can help you understand the pros and cons of different options.

Talk to a Life Insurance Expert

Avoiding these mistakes can be easy if you work with a Farm Bureau agent. They can answer your questions and help you find coverage that fits you.

1 Female, non-smoking with $50,000 in yearly take-home pay, no additional debt or legacy desires with a rental payment of $1,500 per month. 

Neither the Company nor its agents give tax, accounting or legal advice. Consult your professional adviser in these areas.