For many people, life insurance can feel complex and intimidating. We understand. Here are five common life insurance mistakes people make, and how you can avoid them.


    If someone depends on your financial support — or on your services that have financial value — you should likely own a life insurance policy. So, what holds people back from purchasing life insurance? Usually it’s one of two things.

    First, finding the right policy can be intimidating, says Tom Maliszewski, ChFC, CLU, a Financial Planning & Sales Support senior consultant at Northwestern Mutual. Where do you get it? How much should you get? Second, people generally don’t like thinking about their own mortality. Facing and planning for your own death can be unpleasant.

    You can start to take action by doing your research (try online and ask around among your friends). And reframe how you view the task as an opportunity to provide for your family in the future and ensure their peace of mind right now.


    Many businesses participate in a group life insurance plan that provides basic coverage for eligible employees. If you die while employed at that company, your beneficiary (usually your spouse or children) can file a claim and get the death benefit — generally up to the value of your annual salary.

    However, in the event of your death, it’s unlikely that a single year’s worth of your salary will be enough to provide for your loved ones for very long. Many group plans allow you to buy additional coverage. While it’s a good idea to consider buying more coverage, it’s not always the best idea to buy extra coverage through your employer. That’s because you could lose your coverage if you leave your job. It might make more sense to buy your own policy outside of work that will cover you regardless of what happens with your job.


    Do you need $250,000? $2.5 million?

    There are some rules of thumb out there (10 times salary is common). But Maliszewski says simply choosing a multiple of your salary may be too simplistic. Instead, take a big-picture view of your finances — looking at what you have and what you want to be able to provide for your family. “We call it lifestyle continuation,” says Maliszewski. “If you were to die today, it’s safe to assume you would want to have your survivors live a similar lifestyle as they do now.” In addition, you may choose to provide enough so your spouse can pay off the mortgage or your kids’ college tuition bills are covered.

    Online life insurance calculators can help you get a sense of how much coverage you need. A knowledgeable financial planner or professional can also help you think through a number of factors to figure out the right amount for your situation.


    So you’re "just" a stay-at-home parent and don’t need any life insurance coverage, right? Maliszewski cautions against this type of thinking. “The value that a homemaker or stay-at-home spouse brings to the household is extraordinary,” he says. Even if you don't bring in an income, homemakers and caregivers provide essential services that have real monetary value.

    After all, what would happen if your family were suddenly left without a stay-at-home parent? Your spouse might need to pay for child care, pricey convenience foods and home maintenance services that you currently provide. Or that spouse might need to take a lower-paid job or fewer work hours in order to take on your responsibilities himself or herself.

    So, if your family relies on your income or your services, factor that in when looking into purchasing a life insurance policy.


    OK, so you got life insurance. Just as you predicted, your family needs that policy’s payout when you die. But they have no idea how to get it.

    It could be that they don’t know where to find your policy information. Or, worse yet, they don’t even know that you have a life insurance policy. Either way, they can’t file a claim — at least not right away.

    Spare your family the stress of financial worry when you’ve already done the work to provide for them. Tell your beneficiaries exactly where your policy information is located. Send the details in an e-mail in case they forget. Even better, give them the policy details — including the name of the company holding your policy, the benefit amount, the named beneficiaries and the details on how to file a claim.

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