If you have loved ones who rely on your income, buying life insurance is one of the most crucial decisions you’ll ever make. You’ll get the comfort of knowing your loved ones will be taken care of if you’re not around to look after them once you’ve put a policy in place.
It’s crucial not to overspend on life insurance for a few reasons. First of all, whenever you spend too much money on anything, you’re wasting your hard-earned cash. But secondly, if you take out expensive life insurance policies, you run the risk of being forced to cancel your policy if the premiums become too high to bear.
1. Your death benefit is very large
As a rule of thumb, you should purchase life insurance equivalent to 10 times your earnings. And it’s not even a terrible idea to increase that number to account for other expenses like mortgage repayment or funeral costs.
However, if your yearly salary is $100,000 and your family can live comfortably on it, there’s no need to pay for a life insurance policy with a $2.5 million death benefit if you don’t have an excessive amount of debt (mortgage or otherwise). Sure, the notion of being able to provide your loved ones with that much financial security may be appealing, but if premiums are ultra-high, it may not be worth it.
2. You bought a policy that didn’t require a medical exam
Some life insurance firms do not require a medical examination. However, selecting one of these may be detrimental to your interests.
Those that don’t need a test run the danger of insuring those with significant medical problems, and you can bet they factored it into their premiums. It may be cost-effective to get a policy that bases premium prices on how well you perform health-wise if you’re in reasonable good health.
3. You have a whole life policy
The benefit of whole life insurance is that it protects you for the rest of your life. Whole life insurance also builds up a cash reserve, which may be accessed or borrowed against as needed.
Whole life insurance may be rather costly, to the extent that many policyholders give up their coverage after a few years because they are unable to afford it. Term life insurance is a better option if you want to spend less on an ongoing basis and avoid the risk of having to surrender your coverage.
Overpaying for life insurance is something you should not accept as a fact of life. If your premium has gotten out of control, it’s time to look for another policy that works better with your budget.