7 Life Insurance Mistakes to Avoid

In a recent piece by MSN Money, they give us 7 life insurance mistakes that can be easily avoided. I wanted to pass them along.

1. Thinking you have enough: “Only 20% [of those polled] said life insurance should replace the income of the person who died, in order to continue to support any children and other dependent family members.” “In fact, a third of adults have no life insurance at all, says Steven Weisbart, the chief economist for the Insurance Information Institute.” Yikes!

2. Not talking about it at all: ” Though life insurance isn’t required the way auto insurance is, Weisbart says it is “morally required,” because “if you have dependents, you owe it to them to protect them from the loss of your capacity to earn an income.” ”

3. Relying on old rules of thumb. There are alot of ‘rules of thumb’ as it relates to life insurance coverages. But it is difficult to calculate with a simple formula. Debt, savings, and income-producing assets can all affect the equation.

4. Ignoring your non-monetary income. Items such as company-sponsored health insurance will pass when you do. When calculating your coverages, keep these items in mind. They can be very expensive if your surviving dependents do not have access to a company plan. Your insurance policy should account for those ‘new’ expenses.

5. Forgetting the long term. There is a temptation to insure for too long. When the kids leave home, the house is paid off, and the retirement nest egg is in place, the demand for life insurance will drop dramatically. You may be self-insured. If not, a much smaller policy will suffice.

6. Thinking that it’s too expensive. Term life insurance is pretty affordable. Especially when you look at the coverage it provides you and your family. Many agents that sell term insurance offer price quoting on their websites. Before you go uninsured, price it yourself.

7. Forgetting to update a policy. As major life events happen (marriage, babies, kids moving away to college), don’t forget to update your policies. You certainly don’t want to be under-insured, but you don’t want to pay for excess insurance either.

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