5 More Life Insurance Mistakes to Avoid
A while back, we listed the five most common life insurance mistakes the average person will make in his/her lifetime. Today, we’re diving even deeper with five additional mistakes you should avoid.
1. Naming your estate as beneficiary
A beneficiary is the individual (or individuals) who will be awarded all assets the deceased held within his/her possession upon time of death. This includes the contents of all bank accounts, trust funds, property and insurance payouts, such as the term life policies covered by Low Cost Life Insurance. While it is completely acceptable (and advised) to name multiple relatives as recipients, your estate should never be presented as a beneficiary option. This way, your funds avoid slipping into probate or being subjected to unnecessary taxes, thus reaching the proper heirs sooner.
2. Forgetting to name a backup beneficiary
If you steer clear of the first of these life insurance mistakes, you have most likely chosen a close relative such as a spouse or your children to receive your funds after you pass away. Although unlikely, it is possible for a vehicle crash or freak accident to take an entire family in one instance. In this case, the victim’s earnings would be subjected to his/her estate and risk falling into probate, unless an otherwise backup beneficiary had already been appointed prior to the accident. Despite this scenario’s rarity, it is still strongly recommended that you name at least two additional people as your backup beneficiaries.
3. Group life insurance through an employer
It is a misconception that the life insurance plan provided by your employer is your best option. The truth is that group life plans are very limited in their long term advantages. For instance, did you know that your group life insurance policy is only valid for as long as you are employed by the provider? That means if your employment is terminated for any reason at all – retirement, downsizing, etc. – your life insurance is also terminated. There is no extension or repeal you can file to reinstate life insurance with this employer. You must either seek employment with another organization that offers group life insurance, or procure life insurance on your own. So how do you choose which self-insured policy fits you best?
4. Failing to choose the best policy for you
Like buying the right coverage for your car, life insurance on the open market can be difficult to navigate. There are so many providers and options – how can you possibly know which one is better than the other by just skimming through them online?
At Low Cost Life Insurance, our bird’s eye view of the life insurance market gives us the power to see every available life insurance option in your state and match you with the best plan for your health, budget and needs. As an added bonus, your first consultation and life insurance quote are completely free; all you have to do is follow this link to get started. In this way, you don’t have to figure out the best policy all by yourself – Low Cost Life Insurance does it for you.
5. Owning insurance directly on yourself
For those individuals whose net worth exceeds $11.58 million and married couples whose net worth exceeds $23.16 million (according to 2020 IRS limits), having your life insurance policy owned by an Irrevocable Life Insurance Trust (ILIT) can be an effective estate planning tool. This allows you to maintain control over your assets while keeping all life insurance proceeds out of your taxable estate. Please consult with your estate planning professional for advice on your specific situation.
The old adage states: you only get one life. Consequently, that also means there is little room for error when it comes to avoiding critical life insurance mistakes. That’s why Low Cost Life Insurance has made it our mission to provide people like you with honest, upfront policies from every available provider.
Not sure what you need? Maybe you’re ready to dive into a great life insurance policy? We can help!