5 Worst Life Insurance Mistakes

There are plenty of benefits to buying a life insurance policy, but there are also many factors to consider. Making a mistake with your life insurance can cause trouble for you or your beneficiaries. Here are five of the biggest life insurance mistakes you must avoid:

Waiting to Buy Coverage

Many people forget to buy insurance until they encounter an accident or unexpected event that requires it. You never know what can happen in the future, so waiting too long to buy health insurance can be a big mistake. As soon as you feel like it's appropriate to have life insurance, you should start looking into policies.

Life insurance typically gets more expensive with age, so the longer you wait to buy it, the more it will probably cost. Health conditions or illnesses can also make you ineligible for life insurance, so buying it while you're healthy can benefit you in the future.

Choosing the Cheapest Policy

It's normal to lean toward insurance policies with lower prices, but it's more important to choose the policy that best fits your needs. An insurance agent San Diego or broker can help you determine the policy that will be the most beneficial for you and your loved ones. The price will likely play a role in your decision, but it shouldn't be your only consideration.

Missing Payments

With some types of life insurance policies, if you miss a payment, it could affect your coverage. Universal life insurance usually provides guaranteed protection, but if you miss a monthly payment, it may no longer be guaranteed. Even missing just one payment could have a long-term effect on your coverage.

Many insurance companies allow at least 30 days after a missed payment before changing the guarantee, but all companies are different. Before buying a policy, you should be sure of how the company handles late or missed payments, especially if you think you may miss a payment.

Only Naming One Beneficiary

Only naming one beneficiary is simple and easy, but if your beneficiary passes away before you, your plan may be paid to your estate instead of to an individual. This can create a complicated situation, so it's best to name a backup beneficiary or to name two beneficiaries. You should also check your life insurance policy every few years to make sure the beneficiary information is up-to-date.

Not Treating Life Insurance As an Investment

If you have a variable life insurance policy, you should treat it as an investment. With variable life insurance, part of your premium goes toward the insurance, and the rest is invested as cash. The value of the cash investments fluctuates, and many people treat the money like it's a part of their retirement fund. To take full advantage of this, you should always pay an adequate amount for your premium.