������ϲ�����

Buying life insurance can be confusing, but it’s an important process to help protect your loved ones. Here are some of the most common mistakes to avoid as you navigate how to buy life insurance:

������ϲ�����ly protecting your loved ones is what life insurance is all about. Sadly, many families in the U.S. don’t own any (or enough) life insurance – often because they have misconceptions of the expenses.

LIMRA data shows¹���ٳ󲹳�:

• 46% of U.S. households don’t own any life insurance.
• 44% would feel the financial impact within six months if the household’s primary wage earner passed away.
• 28% would feel the impact within one month.
• Half of the millennials surveyed thought a policy that costs around $160 per year would cost $1,000 or more.

��

Life insurance can be relatively inexpensive. For example, on average, a 50-year-old male nonsmoker in good health can get a $500,000, 20-year term life insurance policy for about $118 per month. A healthy female could pay on average just $92 per month.²

To help determine if the amount of life insurance you’ve purchased will be enough to support your loved ones, try this quick trick.

Here’s an example of how to buy life insurance with an estimate for a $500,000 policy. First, cut it in half. The result is $250,000. Then, drop a zero. You get $25,000. That’s how much money your heirs might be able to generate in annual withdrawals from the policy’s death benefit. If $2,083 per month won’t be enough to provide for your family, then $500,000 isn’t enough insurance.

Ask a licensed, independent, fee-based financial advisor to help determine your need for insuance and how it fits into your overall plan.

Your goal is to get the insurance you need at the lowest price. Generally, the cheapest annual cost is provided by a type of life insurance called a “term” policy, which lets you lock in the price for a specific term (a period up to 30 years). Term policies can be a great option for most people because you likely won’t need the policy after the term is up – for example, after the kids are grown and you’ve retired.

But that’s not always true. In many cases, you’ll need to maintain coverage for your entire life (e.g., as part of an��estate plan), and term insurance becomes more expensive if it’s held after the term limit is reached. If you need insurance for a longer period, consider whole-life insurance, which provides coverage for your entire life. You might pay more for this in the early years of holding the policy than you would for term insurance, but it generally becomes more economical over the life of the policy.

You could also consider “universal life” and other types of insurance, which attempt to merge the features of term and whole. You might also find yourself needing more than one policy – some providing temporary coverage like term insurance, and others offering permanent protection.����An ������ϲ����� advisor can help you identify your potential insurance needs at a high level and how it impacts your financial plan.

Life insurance prices are based on probabilities of death, and every insurance company uses different data to assess your risk. Most insurers charge more if you smoke, but many have different views regarding other habits or medical conditions. For example, some won’t insure people who skydive, while others merely charge more. It’s important to shop around when buying life insurance – just as you would for any major purchase.

This mistake is the flip of the prior one. When people do shop for rates from several insurers, they often select the company offering the lowest price. But that can be costly if the insurer goes out of business or is unable to pay the benefit you’re paying for.

Therefore, it’s important to examine the insurer’s ratings and its “claims paying ability” as part of your process for buying life insurance. Your insurance agent or broker can give you this information.

If you’re considering a whole or universal life policy, your insurance agent will give you a document called an “illustration” that shows the annual cost of the policy and its predicted cash value for the future. Be aware that the numbers you see on the illustration are merely projections and aren’t guaranteed. The only information you can rely on is the insurance contract itself – the legal agreement between you and the insurance company.

As with every aspect of��financial planning, evaluating your life insurance needs is an ongoing process and should evolve as your life changes.

Over time, you might get married, welcome a new child or say goodbye to a loved one. Your health, income, occupation and heirs can all change. So, a policy purchased 20 years ago might have been perfect at the time, but its benefit may not be what you need today.

You should review your insurance needs every few years and anytime you experience a major change in your life, just as you would review your financial plan or��revise your will. Your licensed financial advisor can help you decide whether the coverage you currently have is the coverage that’s still right for you.

As you review your insurance needs, you may decide it is worthwhile to replace a current policy with a new one. But if you’re going to replace a policy, don’t cancel the old one until the new one is in effect. You don’t want to be without coverage – even for a single day.