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Top 10 Mistakes To Avoid When Buying Life Insurance

Licensed Life Insurance Agent/Marketing Manager
April 04, 2020

Choosing the right company from among the thousands of life insurance companies in the United States can be daunting. This is particularly true for those considered high risk life insurance or that have pre-existing medical conditions. That's why it's important to avoid the most common mistakes that can happen before starting a life insurance policy.

Common mistakes to avoid when you purchase life insurance include:

  1. Going with the lowest quote
  2. Beware of bundling
  3. Not having enough coverage when they need it
  4. Not knowing the types of life insurance policies available
  5. Thinking life insurance from your employer is enough
  6. Only insuring the primary breadwinner
  7. Limiting your options to one life insurance company
  8. Paying higher rates when you don't have to
  9. Owning an insurance policy ends up not paying out
  10. Taking no for an answer

Top 10 Mistakes To Avoid When Buying Life Insurance

People make mistakes every day. We want to help you avoid the most common mistakes made when purchasing life insurance. 

1. Going with the lowest quote

Now, at first this may seem crazy, but let us explain.  First, many of the mistakes that are made when buying life insurance happens simply because someone has been lured in by a really low quote.

In a lot of cases that super low quote that you see won't end up being the actual rate that you pay. Quotes are typically given with very little information about yourself, your ultimate rate will be determined once a life insurance company learns more about you, and it may not be the first quote you saw.

You should expect that your life insurance agent will walk you through what it takes to qualify for a particular rate class. The rate class you are given will ultimately determine how much you will pay.

Your life insurance agent should ask you questions and learn more about your needs so they can make the best recommendation for a life insurance policy, company, and price. If done correctly you should have a good idea at this point how much your life insurance policy will cost and it likely won't be the flashy low quote you saw on the internet.

2. Beware of the Bundle!

When it comes time to buying cable TV or you’re trying to get a great deal on your cell phone, by all means “Bundle” to your heart’s content!

But don’t get fooled when it comes to life insurance, in fact, just by deciding to bundle your life insurance, you could actually be making five life insurance mistakes that can haunt you later on.

Since life insurance rates are regulated you likely aren't really getting a discount on life insurance all this means is that the insurance company is getting your additional business. And the more insurance they have on you the less likely you are to take your business elsewhere. Plus your life insurance rates are partially determined by your age so by the time you want to switch companies you will most likely have to pay more than what you are paying now because you are older.

3. Not understanding how much coverage you will need

If there is one thing that the “Great Recession” has taught many of us, it’s the value of a consistent paycheck.

Nowadays people seem to understand that a $100,000 life insurance policy for someone in their 40’s with two kids just isn’t going to go very far.  The problem is that for many who are looking to purchase life insurance, they’re doing so to take care of the here and now and aren’t looking into the future 10 or 20 years from now.  Which is why, not buying enough life insurance the first time you buy a policy can definitely be a mistake that will haunt you later on down the road.

Well, it's simple if an insurance policy fits easily into your budget, you’re much more likely to have it in place when you need it.  Far too often we get calls from clients who have told us that they used to have a ton of life insurance, but they got rid of it because they couldn’t afford the payment.  We don’t want that to happen to you!

Additionally, if you need to buy more life insurance later, this can be more difficult. If you are looking for more coverage later you are older and should expect to pay more than what you did previously for a policy. If you combine that with any recent health conditions you could see a substantial increase in price.

It is important to look towards your family's future financial needs when purchasing a policy now so you can keep the lower rate when you really need the coverage.

4. Not knowing about the different types of life insurance

Mistakes when buying term life insurance aren't only limited to where you buy your life insurance, they can often include the type of life insurance you buy as well. 

Some important questions to ask to determine the right type of policy for you include:

If you aren't sure which type of policy is best for you give one of our life insurance agents a call and they can walk you through the process. 

5. Thinking life insurance through your employer is enough

If you have life insurance coverage through your employer, that is a great benefit! Learn more about your policy including:

  • How much life insurance coverage you actually have?
  • What type of coverage is it?
  • Will the life insurance coverage expire or depreciate later in life?
  • Do you get to keep this coverage after you leave this employer to retire?

In many cases, you may not be able to keep your life insurance if you leave the company or the coverage amount might be lower than what you need. Calculate how much life insurance you need to determine if you already have enough through your employer.

Even if your coverage amount is enough, if you aren't guaranteed to keep that policy you may still want to consider getting a different policy on your own to ensure you and your family are covered.

6. Only insuring the primary bread earner

In terms of life insurance, it can be easy to focus on insuring the primary breadwinner. However, it is important to also consider what it would take financially to replace a full-time homemaker.  Which is why it’s so important not to link one’s financial value solely to a paycheck.

It would be difficult to maintain your current lifestyle in the event of losing a stay at home loved one. You would likely find yourself utilizing:

  • Daycare and after school programs.
  • Cleaning services.
  • Eating outside the home much more often.

This can also create a financial burden on a family. You should consider insuring all those who are contributors to the household, not just those we are bringing a paycheck. 

7. Limiting your options

If you are only working with one life insurance company, you are limiting your options. Working directly with one company will only allow you to see rates and policies from them. It won't allow you to shop around or explore different types of policies (we mentioned this in mistake #4).

You have more options if you work with an independent life insurance agent. They work with multiple life insurance companies and can help you find the best policy, life insurance company, and rate for your situation.

Also, if you limit yourself to one life insurance company and your application gets denied you will have to restart the whole process over again.

By choosing to work with just one insurance company you’re basically putting all your eggs in one basket!

8. Paying higher rates than you have to

Make sure that you shop around so you don't end up paying higher rates then you have to. This one goes hand in hand with mistake #7. 

If you are young and in perfect health shopping around isn't as important, you will likely get a low rate from most carriers. 

However, if you are older and/or have any health conditions or if you are a smoker you could risk paying too much for life insurance. If any of this applies to you, it is important that you shop around. Each life insurance company views things a little bit differently and knowing which company looks more favorably on your situation can help save you money. 

If you aren't sure where to start call us today. Our life insurance agents can help you find the right company and rates to fit your needs. 

9. Owning a policy that ends up not paying out

You spent time and money on a life insurance policy and now it might not payout. Why would that happen? It could be for a variety of reasons including the following:

  1. Premiums stopped being paid
  2. There was misinformation on the application

It probably sounds like common sense, but if you stop paying for the life insurance policy you could lose the coverage. There are times if money is tight that one of the first things that can be cut is life insurance coverage. If you pay into that policy and then cancel you may or may not get your money back and you will lose the death benefit payout. 

If you put inaccurate information on the application intentionally, you run the risk that the insurance company will end up not providing a payout to your beneficiary. 

Once you pass away and your beneficiary files the claim to receive the payout, the insurance company will conduct an investigation. If they find that information given wasn't accurate they may not give your beneficiary the initial death benefit payout. 

When filling out the application give the most accurate information to the best of your abilities in order to avoid this situation.

10. Taking "NO" for an Answer

Yes, it’s true that many people simply won’t be able to qualify for traditional life insurance coverage.  But that doesn't mean you can't apply for a different type of coverage and get approved.

Also, just because you were declined coverage from one company, doesn't mean you will be with others. To find the best options for you, you should speak with a life insurance agent.


So there you have it, the top 10 most common mistakes people make when buying life insurance.  Purchasing life insurance can be a daunting task, avoiding these mistakes can help you find the right life insurance policy.


Written by
Chelsie Ball
Chelsie is fixated on developing innovative ways to present complex ideas and maneuvering people to the information they need. She has worked in digital marketing for the past eight years and has been a licensed life insurance agent since 2010. When she isn’t looking out for the user, you can find her watching Netflix or desperately trying to find a real hobby.