- If your life insurance policy isn't affordable, you run the risk of being forced to let it lapse.
- It's important to strike the balance between adequate coverage and affordable premiums.
Don't waste your money for no good reason.
If you have people in your life who depend on you financially, then buying life insurance is one of the most important moves you can make. Once you put a policy in place, you'll get the peace of mind that comes with knowing your loved ones will be protected in case you're not around to support them.
But it's important not to overspend on life insurance for a couple of reasons. First, any time you overspend on anything, you throw your hard-earned money away. But secondly, if you take on very expensive life insurance premiums, you'll run the risk of being forced to let your policy lapse once those premiums become too much to bear. And if these signs apply to you, you may be overspending on life insurance when there's a better solution to be had.
1. Your death benefit is very large
As a general rule, it's a good idea to buy enough life insurance to replace your salary 10 times over. And it's not even a bad idea to pad that total to allow for other costs like paying off a mortgage or covering funeral expenses.
But if you earn a salary of $100,000 a year that your family lives comfortably on, and you don't have an excessive amount of debt (mortgage or otherwise), then there's probably no need to keep paying for a life insurance policy with a $2.5 million death benefit. Sure, you might like the idea of being able to offer your loved ones that much financial protection, but if it comes at a cost of ultra-high premiums, it may not be worth it.
2. You bought a policy that didn't require a medical exam
Some life insurance companies don't require a medical exam. But choosing one of these could work against you.
Companies that don't require an exam run the risk of insuring people with major health issues, and you can bet that they bake that cost into their premium rates. If you're in reasonably good health, then it could pay to buy a policy that does base its premium costs on how well you're doing health-wise.
3. You have a whole life policy
The upside of whole life insurance is having a policy that covers you on a permanent basis. Plus, whole life policies accumulate a cash balance, and that's money you can tap or borrow against as needed.
But whole life insurance can be horrendously expensive, to the point where many policyholders wind up giving up their coverage due to not being able to afford it after a few years. A better bet may be term life insurance, where you'll spend a lot less on an ongoing basis, thereby lowering the risk of being forced to give your coverage up.
Overpaying for life insurance isn't something you should resign yourself to. If your premium costs have gotten out of hand, it may be time to explore a new policy that works better for you financially.
Our picks for best life insurance companies
Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.
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