Selecting the right life insurance policy is no laughing matter. We all need the proper coverage. (Yes, even you single person unless you already have funding for your funeral lined up. I bet you don’t, though.) Yet, when we review policies from non-clients (people looking for our help), many of them have made some devastating life insurance mistakes.
These mistakes aren’t in the basic realm of life insurance mistakes such as the “I have the wrong death benefit coverage” mistake. (Purchasing an additional policy or reducing the death benefit on the current policy fixes this mistake.) These mistakes are serious, made for one reason or another. The mistakes we are going to discuss are devastating life insurance mistakes that you generally can’t recover from.
Devastating Life Insurance Mistakes #1 – Shopping Around
Purchasing life insurance, or any insurance, is not like shopping for a car. You can’t stop at dealer XYZ and see what the price of a car is, and then go to dealer ABC and see if you can get the car for $5,000 less. Purchasing life insurance doesn’t work that way.
Premiums are set by the states and the carriers. Agents have no bearing or influence on them. They can’t discount, and agent incentives to you are against the law.
When you shop around, you are treating life insurance as though it is a commodity like bread, gas, and milk. Why is shopping around a mistake? You might be missing on valuable, additional benefits important to you. You erroneously equate the value of life insurance to the premium cost only. In our opinion, the premium cost is actually a third of the value, at most.
The other two-thirds is the agent who helps you with the policy. Knowledgeable, honest life insurance agents are worth their weight in gold. Their value is priceless. I am sure you can agree that when you find someone who works only in your best interests, you don’t want to lose that person. You value his or her knowledge. Great agents continue service long after the application. They help you during the underwriting process and provide service long after the transaction.
How To Avoid Mistake #1
The key to avoiding mistake #1 is to find a dedicated and honest life insurance agent who works in your best interests only. This agent should have access to many carriers to match your specific needs to the right life insurance policy. Let the agent do the shopping for you. If he or she has access to over 40 insurance carriers, there will be one carrier policy that meets your situation and budget.
Why is shopping around yourself a devastating life insurance mistake? Because you are only focused on price, not the overall value. Most times, you will select the lowest cost option, thinking it is the right one for you. Years later, you find out the policy you purchased is the most expensive in the long run. How does this happen? A person contacted us about the following situation. You find a policy for your husband. It is cheap. Upon his death, however, the policy does not pay a death benefit because he died within 2 years of policy issue. As you can see, by focusing on cost only, you just made a devastating, long-term expensive mistake.
Devastating Life Insurance Mistakes #2 – Not Accepting The Policy
When you apply for a life insurance policy, there is no guarantee you will receive the premium rate quoted. (Unless you applied for a guaranteed-issue policy.) In order to obtain the lowest cost policy for your given situation, you need to be honest and disclose any health conditions or lifestyle risks. Then, agents have the ability to design an accurate quote (but still an estimate). Generally speaking, you also need to go through medical underwriting which includes a paramedical exam, height and weight check, blood/urine sample, and potentially additional questions. If you go with a non-medical life insurance policy, you will pay a higher rate because you avoid the paramedical exam.
What if you receive an offer that is higher than quoted? Easy answer. Take the policy. It is important to remember who is the recipient of this life insurance money. The recipient is your wife, husband, children or another loved one. Why would you sacrifice their financial security by not accepting the policy? You can always accept the policy and then work with your agent (or another one) to work on improving the policy. Most times, we have found, people decline the policy, then procrastination sets in. Months and years might go by. Suddenly, they need life insurance, and but they have the inability to purchase a policy because they just had open heart surgery or some other significant health condition. They jeopardized their family’s financial security because they did not want to pay a higher premium.
How To Avoid Mistake #2
A premium increase isn’t that much more when you really analyze it. For example, an additional $10 per month in premium might seem a lot, but it is only $0.30 per day. We can find $0.30 per day, right?
And, if you are a smoker or use tobacco, nearly all carriers will drop you to non-tobacco rates once you are clean for a year.
Most of us have health conditions which make life insurance premiums higher compared to the premiums of a healthy person. This is where a qualified agent helps. He or she can review your situation and then match a policy at the lowest cost possible.
The way to avoid mistake #2: see the big picture. A higher premium offer means you are still insurable. If you question the offer, accept it, but work with your agent to find a better solution, if warranted.
So, just take the policy. Your loved ones are connected to that life insurance policy.
Devastating Life Insurance Mistakes #3 – You Are An Expert
We are all experts at something. If you are a hair stylist, you know how to style and cut hair the right way for your client. If you are a mechanic, you have a skill set unmatched by many people. Same if you are a physician, dentist, veterinarian assistant, a teacher, and on and on.
Life insurance agents are experts, too. Sure, determining your need is not rocket science. We put together an easy, and accurate, life insurance needs analysis. And, you can go anywhere online to find a price. The mistakes we have seen are from people who scan the online quotes, see a few, and purchase a policy. They don’t really know what they purchased until years down the road. See our true story from earlier. What if you are diagnosed with cancer and your term policy is up next year? Wouldn’t you like to know if your term policy is convertible to permanent insurance without underwriting evidence? I think that would be an important option, especially if you have a family. You wouldn’t know this if you just scanned a few carriers and selected the lowest cost option.
How To Avoid Mistake #3
There is more to the life insurance cost and coverage determination. Good life insurance agents know the underwriting process and benefits of each carrier. They educate you on your needs, your family, and that their recommended carrier is the right one for you. How to avoid mistake #3. Simply, find an honest life insurance agent. We discussed the qualities of a good life insurance agent in a previous post.
It’s true; we do offer a link to apply life insurance yourself that takes 10 minutes. We designed the link for those who really don’t want to bother with an initial call to a life insurance agent. But, the insurance results are only as good as the information you put in. It appears that we are not involved in the process. However, we are always in the background ensuring the coverage you select is the right coverage for you. If we could not, we would not work in your best interests.
Have you made any of these devastating life insurance mistakes? If so, there is still time. Contact us or use the form below. We only work with your best interests and are happy to help you and your family.