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Purchasing life insurance is a wise decision when you have people in your life who may be financially harmed in the event of your death. prematurely.
Therefore, below, we share three mistakes that you should avoid when buying a policy.
1–Do not buy generous insurance
It can be complicated to calculate how much your insurance should cover, and the reality is that there is no formula to know. The rule to follow in this case is that, in the event of your death, your loved ones can receive a good amount of money. That is, you should not be stingy in these matters. And it is that, if you do not do so, you will not be able to obtain the main benefit of your policy, which is to leave your family with good financial protection.
According to The Ascent, personal finance advisor Dave Ramsey suggests purchasing coverage that can replace at least 10 to 12 times your annual income. However, you may want more to cover things like paying for your children’s education.
2–Buy whole life insurance
So-called whole life insurance builds a cash value, while term life insurance does not. A whole life insurance policy will also cover you for the rest of your life, while a term life policy will only provide coverage for a limited period of time.
Despite these apparent benefits, Dave Ramsey thinks that buying whole life insurance is a bad idea for one big reason: its high cost. Whole life insurance can be extremely expensive, costing twice or triple what a term life policy costs.
3–Getting a term life policy too short
As you know by now, it’s best to get term life insurance, but you shouldn’t buy a policy with too short a term, for example, one that has only 10 years of coverage.
If you have young children, a 20-year policy is probably more appropriate. And if you want to make sure your partner is covered until she can apply for Social Security, you can choose a 30-year term.
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