Posted by: Stephen Mills. Group1a
It turns out that choosing life insurance is a lot more complicated of a process than that of most types of insurance. Also a majority of life insurance holders do not buy the correct type of life insurance.
Some people make mistakes right from the get go, for instance a common mistake is to just accept whatever policy your job offers assuming that it’s the right plan for you. This is a common mistake because it takes the thought process out of buying life insurance by assuming your place of work has done the proper research. Many people like this type of life insurance path because the money is automatically deducted from their paychecks so ultimately this whole process takes very little effort on their part.
There are two common reasons why most people do not choose the correct life insurance policy. The first reason being the fear of the inevitable; death. It has been said by some insurance agents that some of their clients rush through the policy choosing process because they don’t feel comfortable talking about their death. Another major mistake when choosing a life insurance policy is not choosing one at all. A lot of people just try to ignore the fact that someday they are going to pass away thus never thinking to buy a plan.
Buyers beware, for those who do choose to buy a life insurance policy. “Even most insurance agents and financial planners rely on rules of thumb or unsophisticated worksheets -- or put the onus on clients to decide how much insurance to carry.” (BusinessWeek p2) It turns out that even professional life insurance agents use general guidelines when helping people choose policies.
The overall consensus is that there really isn’t a one size fits all plan for life insurance or a standard age to start a policy. Plans have to be customized to each individual depending on several factors; number of beneficiaries, type of required lifestyle and age. A common rule of thumb is to start a life insurance policy once you have a beneficiary such as a significant other or child. As far as how much to insure yourself for, well a common rule of thumb is five to ten times that of your annual salary but once again that is just a common rule of thumb and the actual amount is something that only you can decide depending on your way of life.
• "5 Life Insurance Blunders to Avoid." 5 life insurance blunders to avoid. Ed. BusinessWeek. 28 Feb. 2007. Businessweek. 27 Jan. 2009
• Coy, Peter. "Scared to Death of Life Insurance." 21 Feb. 2005. Businessweek. 27 Jan. 2009
• "Top things to know." Money 101 Lesson 20: Life Insurance. 2007. 27 Jan. 2009