10 Common Mistakes People Make When Purchasing Term Life Insurance

Buying term life insurance might seem overwhelming at times. Fortunately, we have listed the top 10 mistakes people make when purchasing term life insurance below.

#1 Procrastinating or Waiting to Obtain Coverage

Delaying coverage leaves your loved ones and assets vulnerable not to mention that life insurance premiums increase as we get older. If your health declines, you may pay more as well — assuming you can still get coverage. Delaying for any reason is risky financially and could mean coverage becomes limited or not available at all. (See the FAQ "When is the best time to buy a term life policy?").

#2 Trusting Quick Online Quotes

The Internet is full of online forms and calculators that rapidly provide a term life insurance rate quote. These tools are handy for getting a ballpark estimate of what you might pay. But, it takes more to pinpoint an accurate rate. Your unique situation, age, health, medical history, needs and budget must be properly assessed to get an appropriate amount of life insurance and term length — and an accurate rate. Plus, only a licensed life insurance agent can provide you with an accurate rate (based on your health profile) and sell you life insurance.

#3 Purchasing Unsuitable Term Length or Coverage Amount

How much coverage do you need? For how long? There are plenty of variables to consider. Coverage amounts of $250,000 or $1 million can sound like fortunes. Unfortunately, some people discover too late that the money didn’t cover everything they had intended. It’s important to figure out your current expenses and do your best to accurately assess future ones. A licensed life insurance agent can help at no cost to you or you can use our handy online term life insurance needs calculator .

#4 Purchasing Life Insurance that is not Medically Underwritten

Without a medical exam, the life insurance company cannot as precisely determine who is healthy or not, so it spreads the mortality risk across all of the policies and averages the cost. With these types of life insurance policies, people with a greater risk for dying (higher mortality risk) are paying the same rate as those who are healthy (lower risk). If you are healthy, medically underwritten term life insurance can often save you money. With an accurate health profile, the life insurance company can place you in the appropriate rate class, and charge you according to your specific health situation.

#5 Neglecting to Periodically Review Your Policy and/or Needs

It’s smart to review your term life insurance policy in the same way you might review other aspects of your financial or retirement plan. The life insurance coverage that fit fine when you first got your policy might not be the best for your needs anymore. You might decide you need more coverage — or less. You could decide to convert your term life insurance policy to a permanent policy.

#6 Relying Solely on Employer Coverage

Employer-provided life insurance is a wonderful benefit, but it can be risky to rely on it as your only coverage. In many cases, it simply doesn’t offer enough protection. It’s typically considered a general perk — one that isn’t based on your specific needs. By having a personal term life insurance policy, you can secure enough coverage to protect your loved ones and tailor it to your specific term life insurance needs.

#7 Overlooking Expensed that Should Be Considered

When people shop for term life insurance coverage, many focus primarily on the most obvious expenses, which could result in being drastically underinsured. Here are some commonly overlooked expenses you should take into account:

• Is there enough money to cover additional childcare costs?

• Will your family require help to maintain the household?

• Do you plan to pay for your children’s college education?

• Do you want your family to be able to pay off your mortgage, or buy a home?

• Will your family have health coverage - and money to pay for it - if you are suddenly taken from them?

#8 Assuming Smokers or People with Health Problems Cannot Get Coverage

Policies are available for smokers and people with health conditions, but it’s important to be honest with your life insurance agent. It will help the agent to give you the information you need to get the appropriate coverage. The medical exam will reveal tobacco usage (including the nicotine used in transdermal patches). If you quit smoking or your health improves significantly after getting your policy, you can always speak to a life insurance professional to see if it’s possible to qualify for a lower rate.

#9 Insuring Only the Primary Breadwinner

Many people think only in terms of insuring the family’s main breadwinner. It’s important to recognize that a person maintaining a home and caring for a family has a financial value, even if they are not currently earning money. If an individual takes care of children or another person in the home, such as an elderly parent, the caregiver’s death could create unexpected - and significant - expenses. These costs can run for years and really add up.

#10 Assuming only families need insurance

Term life insurance is the number one life insurance choice for families*. But, children aren’t the only reason to secure financial peace of mind. Here are some areas for you to consider:

• Dependents such as elderly parents or siblings

• Assets

• Debts and obligations

• Funeral costs/Medical bills

• Charities/Philanthropic projects

Term life insurance is an affordable, reliable way to protect your loved ones and assets, whether you are single, married or have a family. Our licensed life insurance agents work with you to help you apply for an appropriate amount of coverage and get the affordable term life insurance you need.

Ready to apply? Click here now to start your free, personalized term life insurance quote online!

*LIMRA MarketFacts 2005.

©2010 Matrix Direct Insurance Services. All Rights Reserved. Matrix Direct, Inc. is a subsidiary of American General Life Insurance Company(AGL) and an affiliate of The United States Life Insurance Company in the City of New York (USL).

Rates current as of 6/1/10. Preferred Plus Underwriting Class, Form #07007, issued by AGL, Houston, TX. Premium charges depend on evidence of insurability. Premiums increase at the end of the guaranteed term if renewed. Death benefit remains level. The policy may be contested for two years from date of issue for material misstatements or omissions on the application. Policy is limited to return of premium paid in the event of suicide within first two years. The underwriting risks, financial and contractual obligations and support functions associated with products issued by AGL are its responsibility. AGL does not solicit business in the state of NY. Policies and riders not available in all states. In NY State, term life insurance is available through USL, Form #07007N. 75% Comparison based on monthly premium rates as of 6/1/10 for a 10 year level term policy, issued at each company’s best published rates for a female, age 30, non-smoker. Agency services provided by Matrix Direct Insurance Services in CA (#0B57619), ME, MA, and OK; Matrix Direct Insurance Agency, Inc. in UT; and Matrix Direct, Inc. in AR (#246412) and all other states, except SD.