Paying too much for life insurance can mean less money to do other things.
- Life insurance is an essential purchase for many people.
- Consumers do not want to pay more than necessary for life insurance.
- These signs could suggest a policy is more expensive than it should be, including having a larger death benefit than you really need.
The protection offered by a good life insurance policy is invaluable. With the right coverage in place, policyholders can ensure that their death does not cause financial devastation for their surviving loved ones.
But while comprehensive coverage is essential, it’s not a good idea to pay too much for it. This is all the more true since these policies are expected to remain in force for decades. With long-term coverage, paying higher life insurance premiums could result in significant ongoing costs.
It can be hard to tell when a life insurance policy is too expensive. But consumers should watch for these three red flags that may suggest their insurance coverage is costing more than it should.
1. You have a whole life plan
Whole life insurance policies are much more expensive than term life insurance plans. Often the premiums are up to 5 to 15 times higher.
That big extra expense might be worth it if most people needed lifelong insurance coverage, but that’s usually not the case. Insurance is meant to replace income, pay off debts and support dependents. And at some point, most people stop earning income, pay off most of what they owe, and no longer have anyone to rely on for their income, so they no longer need coverage. .
Term life insurance policies cost less and only provide coverage for a set number of years, so premiums are lower and coverage can end when it’s no longer needed. This means that a term life insurance policy is probably the best choice for most people.
Some people also justify paying more for a whole life insurance policy because this type of insurance has an investment component and term life insurance policies do not. But the reality is that better returns can be had elsewhere and that’s usually not a good reason to pay more for whole life coverage.
2. You have a larger than necessary death benefit
Life insurance costs are higher for people with larger death benefits. After all, insurers take on more risk when they agree to pay out more money in the event of death.
While it may seem like a good idea to leave a fortune to family members after an untimely death, that’s not the point of life insurance. Paying extra premiums to provide funds beyond what loved ones would need to maintain their standard of living is just a waste of money.
3. You didn’t seek coverage
Finally, another major red flag that life insurance coverage is unnecessarily expensive is if the policy was purchased without comparing premiums.
Costs vary widely from insurer to insurer, and people who don’t shop around and compare all of their different policy options can sometimes find themselves paying much higher bills for coverage.
There’s no reason to overpay for insurance when it’s so easy to compare rates online. That’s why most people should get quotes from multiple insurers for a term life insurance policy that provides an appropriate amount of death benefit.
By doing so, it’s possible to avoid overpaying for coverage while still getting the crucial protection that could save surviving family members from disaster.
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