There is so much to consider when purchasing life insurance. So how do you know when you’re getting a good deal? By avoiding these common life insurance mistakes, you can rest assured that you are locking in a competitive rate and protecting those who matter most.
1. Naming Your Estate as Your Beneficiary
It’s hard to believe, but many people fail to properly name beneficiaries when purchasing life insurance. If you name your estate as the beneficiary of your policy, your death benefit may be subject to probate at a considerable cost and delay. This can be avoided by simply naming an adult or a trust as the beneficiary. Furthermore, this mistake can also open the door for creditors to make claims against your life insurance benefit. If, however, you have named beneficiaries, most states provide protection from creditor claims against life insurance death benefits.
2. Failure to Review Your Life Insurance Policy Regularly
Just as your financial needs change over time, so too, do your life insurance needs. This is why it’s so important to complete a life insurance needs analysis on a regular basis. Here at IntelliQuote, we recommend reviewing your life insurance coverage every 2-3 years and at every major milestone in life. Not sure where to start? Allow your IntelliQuote advisor to assist you!
3. Inadequate Coverage
When you purchase life insurance, it’s with one goal in mind: to protect your loved ones and your assets. If you purchase inadequate coverage, you will fall short of that goal. If you’re unsure of exactly how much coverage you need, we encourage you to complete the IntelliQuote needs analysis. Simply answer a few questions and learn just how much coverage to buy. Once you have a grasp on your level of need, it’s time to compare life insurance premiums!
4. Naming Minors as Beneficiaries
Even if you intend to one day leave money to a child or grandchild, it’s never a good idea to list a minor as a life insurance beneficiary. We instead recommend naming a trust as the beneficiary of your policy. Within your trust, you can set up distributions among your loved ones and outline restrictions to protect them from making ill-advised decisions, particularly at a young age.
5. Owning Your Own Life Insurance Policy
Depending on the size of your estate at the time of your death, and the law, owning your own policy can make your benefits subject to estate taxes. We instead recommend having one of your adult beneficiaries purchase and maintain your policy. Under current law, if you never maintained ownership of your policy it is not considered part of your estate and is, therefore, not subject to estate tax.
There you have it, five of the most common life insurance mistakes to avoid. If you’re ready to compare policies and lock in an affordable life insurance premium, request a quote today! Learn why IntelliQuote is considered the online agency of choice.
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