Life Insurance Mistakes to Avoid
For most people, talking about life insurance is not fun. And while ignoring it can compound a family tragedy by turning it into a financial nightmare, more and more people are doing just that. A recent survey by the nonprofit Life Foundation indicated that one-fourth of Americans would consider canceling their life insurance policies in order to save money during the recession.
Before making that kind of drastic decision, consider these common insurance mistakes and you may decide to increase your coverage, not reduce.
Thinking you have enough. In a recent survey of middle-income Americans, only 20% said life insurance should replace the income of the person who died, in order to continue to support any children and other dependent family members. The idea of having a policy that paid out seven to 10 times one's salary, an amount that could easily make sense for someone with young children, sounded like an attempt to sell a needlessly large policy to the respondents.
In fact, a third of adults have no life insurance at all, says Steven Weisbart, the chief economist for the Insurance Information Institute. Of the remaining people, many of them have only the life insurance that comes from their workplace policies, which is usually not enough for people who want to support dependents after their death.