When disaster strikes, life insurance can feel like a parachute that softens the blow that sudden death can leave behind - but only if you invest in a policy that works with your lifestyle.
Unfortunately, many families discover the complexities of life insurance after they have already lost a loved one. Here are three mistakes to avoid making when you purchase life insurance.
1.
Underestimating Long-Term Expenses
When it comes to buying life insurance, the traditional rule was to purchase enough of a policy to replace the income of the deceased for 10 years. However, this advice is considered outdated because it doesn't account for other long-term living expenses like inflation, higher insurance premiums, or the expenses involved with sending children to co lege.
Additiona ly, the 10-year rule doesn't account for the kinds of changes many families have to make after a family member passes away - such as heading back to co lege to provide more financial support or staying home to look after children.
Instead of simply multiplying your yearly take-home pay by 10, think carefuly about a l of the changes that your family would have to make if you or your spouse died and what it would take to secure your family financia ly. Don't forget to add in the costs of maintaining income properties, family businesses, and home-related expenses that your loved one may face in the coming years.
2.
Overlooking the Value of Nonworking Partners
Sometimes when people invest in life insurance, they only think about the income they would lose from working family members and ignore the contribution of nonworking partners. However, because many nonworking spouses contribute to the household in ways that facilitates earning, forgetting about them could cause problems down the road.
For example, if you work ful time and your spouse stays home with the children, their sudden passing might mean that you would have to invest in a live-in nanny or professional day care. Additiona ly, if they take care of things, like household chores and yard work, then you might also be faced with adding a landscaper and a weekly cleaning professional to your monthly budget.
As you evaluate your lifestyle and your spending, do yourself a favor by factoring in what it would cost to replace every aspect of a family member's daily contributions.
If you rea ly want to get down to the details, then factor in their potential for future income generation. For example, if your stay-at-home spouse has a master's degree in business and would likely return to the workforce after your passing, then you may not need as much coverage.
3.
Waiting Too Long to Buy a Policy
As people age, they typica ly develop more health problems, which can complicate investing in a life insurance policy. Because many policies require physicals conducted by trained medical professionals, waiting too long to invest in a policy could end up costing you a pretty penny - or prevent you from qualifying for coverage completely.
To ward off problems, apply for life insurance as soon as you can and update your coverage regularly to accommodate for big life changes. For example, if you take out a life insurance policy as soon as you get married and later get a great job, then increase your coverage to accommodate the change in income. In addition to protecting your family, maintaining current life insurance policies can also provide you with incredible peace of mind.
Whether you are thinking about investing in a new life insurance policy or reaching a settlement for an existing policy, the professionals at Habersham Funding,LLC
can help. As an industry authority, our firm is dedicated to offering helpful information and service to our valued clients.
