7 Deadly Mistakes to Avoid When Buying Term Life Insurance by cashkit4u


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									  Term Life Insurance

         E-Course Series

                      Part 6

The Secret to Saving More And Protecting Your Family's Future.
  7 Deadly Mistakes to Avoid When Buying Term Life


Is your current amount of life insurance enough? How do you know?

For most folks, talking about life insurance sounds almost as fun as a visit to the
dentist. But, like that trip to the dentist, ignoring it can compound a relatively
small issue and turn something that was merely uncomfortable into a complete
nightmare. In the current economy where we are all looking to cut costs, it may
be time to rethink exactly how much term life insurance coverage you really

If you are considering canceling an existing policy, you might want to consider
these 7 mistakes people make with their life insurance before you do.

1. "I'm all set for life insurance!"According to a recent Allstate Insurance
survey of middle income Americans, most respondents felt that people should
have some level of life insurance, but thought that it should only be enough to
cover existing debt and funeral costs. Surprisingly, roughly 20% felt that term
life insurance should replace the income of the deceased for the surviving
family's sake.

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According to a recent Insurance Information Institute poll, fully 1/3 of adults
have no life insurance at all. Of the remaining people, most of them only have
the insurance that comes from their employee benefits, usually 1x, or maybe 2x
their annual salary. In all likelihood, that is not going to be enough income
replacement to adequately support their dependents after their death.

In fact, having a term life insurance policy that is equal to seven to ten times
one's current salary is the minimum recommendation for someone with young
children. This amount will ensure that the kids and surviving spouse are
financially secure enough to make it through the time it takes to adjust to the
loss of a spouse.

2. "Life insurance? I'd rather not talk about it." Let's face it nobody really
wants to think about their own mortality. For most people, thinking about death
is more than a little uncomfortable. Yet, most people do want to make sure their
loved ones are financially secure after their passing.

This weekend, find a few minutes to sit down with your spouse or significant
other and ask the question, "How would you and the kids make it if I were to
pass away?" It is important to address this question now. None of us are
promised another day, and it makes sense to have a plan in place sooner rather
than later. You will never get a second chance to buy life insurance after your

3. "My dad told me to have coverage equal to 7 times my salary."In our
parent's generation, the old advice of having 7 to 10 times ones salary was sound.
In today's world, that is not as useful of a measure because of the diverse life
circumstances found today. Many dynamics that were not so common 50 years
ago can be found readily today. A single person with no dependents has much
less of a need for insurance than the family with a stay at home spouse and 4
young children. Blended families also pose additionally complications when
planning for life insurance.

Instead of a ballpark guess as to how much your family needs, a more accurate
approach is to sit down and make a list of the things that you want to protect.
What would it cost to make sure your kids are raised in the manner you wish, or
for them to attend the college you want them to attend? How will your spouse
manage the mortgage, taxes, utilities, put food on the table, maintain the car,
etc.? These are very small things that are often overlooked when making a
financial plan, but came become very big challenges to overcome in the event of
an untimely death of a working spouse.

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4. "I never thought of that." An area that can be overlooked when making a
financial plan is to consider the employer paid benefits that would be lost at the
death of a working spouse. Costs such as health insurance, retirement account
payments, child care credits, etc. all cease at the death of an employee. Consider
that an employer sponsored health plan is subsidized by the employer. The
question that needs to be asked then is, "If I die, that subsidy disappears. How
will my family pay for healthcare after I'm gone?" Part of the answer of course is
to make sure your life insurance will pay enough money to cover the new health
insurance bill.

5. "I'm too busy to worry about life insurance now." It's easy to lose
sight of the long term view when we are so consumed with managing our day to
day lives. Don't lose track of how long it will take for your kids to be self
supporting, and make sure the amount of term life insurance you have is equal
to the task. A rule of thumb is to plan that your kids will be 'dependent' until age
25 due to college and finding a career. If your youngest is 10 today, you would
want to have at least a 15 year policy to cover that risk period,
6. "It's too expensive." One of the first objections that many people have to
buying term life insurance is that it will be too expensive for them. That is a huge
mistake in thinking, as it is possible to find a policy that fits your needs and your
budget. Term insurance is much more affordable than permanent insurance,
and is the perfect tool for managing your financial risk.

For example, a 40 year old male with a regular build, non-smoker, and taking
medication for high blood pressure can obtain a $500,000, 20year term life
insurance policy for $44.00 per month.

7. Bought it and forgot it. So you bought a term insurance policy 5 years ago?
Are you the same person now that you were 5 years ago? If we are honest the
answer is, "No." Maybe there have been some changes to your lifestyle such as
getting married, having kids, buying a house, etc. These major "life events" are
exactly why you should review your term life insurance policy from time to time
to make sure that your policy covers your "new" situation.

Determining the right amount of coverage that your family needs is one of the
most important decisions you can make. Sit down with your family and begin a
discussion. Once you've determined the right amount of coverage and have
gotten a few quotes, you'll find that you will feel greatly at ease once you start a
term life insurance application. After all, term life insurance is all about offering
the insured peace of mind.

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