Term life insurance is less costly than a whole life policy because it is only for a specific period of time. When buying a term life policy, there are a number of common mistakes people make that can be avoided. Several of the most frequent mistakes are listed below.
<strong>ACCEPTING THE CHEAPEST QUOTE</strong>
Purchasing a term life policy based on the lowest quote can leave an individual without adequate coverage for his or her personal situation. A person wants an insurance agent who provides several quotes from different A+ insurance rated companies that have a range of coverage options. Potential term policy owners need to know how much insurance they will need and for how long to provide financial security for the beneficiaries.
<strong>WAITING TO BUY</strong>
Letting too much time go by before acquiring a policy can become expensive or even run the risk of someone becoming uninsurable. The younger a person is when getting term life coverage, the more affordable the policy will be. While the premiums do not increase during the term of the policy, the initial cost is higher depending on a person’s age and sex when bought. Insurance companies price policies based on a computation of risk factors and the younger and healthier a person is when they apply, the lower the premiums will be.
<strong>COVERAGE ON YOUNG CHILDREN</strong>
The purpose of a term life policy is to insure someone whose death would cause a financial burden on the beneficiaries. Young children do not have financial responsibility for other individuals and a term policy would not be advisable. If parents want to insure their dependent children, a youth whole life policy would be more advantageous. These types of policies generally increase in face value when the child reaches age 18 or 21 without any increase in premiums.
<strong>INSUFFICIENT LENGTH OF TERM COVERAGE</strong>
A policy that does not cover the desired length of time needed can become more costly when another term policy is needed to cover an additional period of time. A person may want insurance to cover the cost of a mortgage or the cost of a child’s college education in the event of his or her death. Buying a 10 year term policy will not cover a 30 year mortgage contract when a 30 year term policy is more appropriate. If someone has teenage children, a 20 year term policy may be too long a period when a 10 year term policy would fulfill the need for the insurance.