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STORM SEASON
Important Note:

June through November our agency may become prohibited from binding coverage should a “Tropical Disturbance” enter the Gulf of Mexico or Caribbean Sea.

In these cases we may be unable to bind new coverage quoted in open proposals until the storm leaves our area and our binding authority has been restored.

Please arrange your coverage protection early to avoid this type of delay. While we regret any inconvenience, the carriers impose these restrictions on all agencies.

Common Life Insurance Mistakes

People obtain life insurance to replace their primary source of income in case the unthinkable happens to the primary source of income in the family. It’s a kind of safety net that the policy holder wants to have for their beneficiaries. Unfortunately, some people unwittingly commit errors when getting a policy. Here are a few common life insurance mistakes you should be aware of.

Increasing Rates

For the initial coverage period, which typically lasts 10 to 15 years, the premium on a term-life policy remains fixed. After this period however, the insurance company will send you an invoice stating a premium which is much larger than what you’re already paying. This may come as a shock. Even more so if you didn’t read the fine print in your original life insurance contract or if you haven’t reviewed your life insurance policy recently.

When this happens, you can submit an updated medical history and negotiate for a lower rate. Alternatively, you can opt out and just cancel the policy.

Not Updating Beneficiaries

Among the most common life insurance mistakes is not updating beneficiary designations. This is the form you submit to let insurance companies know who gets the proceeds of the policy. Not everyone knows that this can and should be amended based on life changes.

Beneficiaries should be updated in case you get a divorce, your original beneficiary dies or you get married. Essentially, any significant changes in your life should be followed by an update in your beneficiaries. This is to avoid legal problems after you pass away.

Going for the Cheapest Policy

Insurance policies can get quite expensive which is why some might be tempted by the cheapest policy available. What most don’t realize is that the cheapest policies are often the most restrictive. Read between the lines and you’ll find out that not all policies are created equal.

For instance, some term life insurance policies can be converted to a permanent policy while many cannot. Some policies have better conversion privileges than others so make sure to understand exactly what’s included in your term life insurance policy.

Single People Don’t Need It

If you’re single and think you don’t need insurance, think again. The simple truth is that even those without a family still have expenses after death. Many single people commit the mistake of not having life insurance coverage and not reviewing their options. Single people still need to be covered if at least to pay for their final expenses and any personal debt they may carry. This is particularly true if someone else has co-signed for debts including school debts, car loans, etc.

Borrowing from the Policy

Tax-free loans and withdrawals can be borrowed against your policy. It’s a great benefit that produces good results as long as it’s done properly. When your policy runs out of money however, everything you’ve taken out becomes taxable.

When this happens, you can continue making premium payments to maintain your policy. The takeaway here is to manage your policy’s cash value. Consult with a tax advisor to get advice on how to avoid tax liability and costly life insurance mistakes.

Group Insurance

Getting insurance from professional organizations isn’t necessarily a bad thing. However, you should know that there is a hidden cost to going this route. Maintaining the policy often requires your continued participation in the group which may itself require annual dues.

One more thing is that membership fees may go up. In effect, the cost of maintaining the policy goes up even though the premium remains the same. This is one of the life insurance mistakes that end up costing people more.

Forgetting Estate Tax

For policy owners who are also the insured, the proceeds are considered part of the taxable estate. If this amount exceeds the tax-free amount and it’s left to a charity or anyone that’s not your spouse, it is subject to estate tax.

To avoid this tax on the proceeds, you can assign the family member who will receive the proceeds as the policy owner. Use your yearly gift tax exclusion as a way for the policy owner to pay for the premiums.

Getting life insurance should be a well-thought process. This is why it’s important to compare as many quotes as possible. To avoid the most common life insurance mistakes, read the fine print and be sure you understand the terms. Making an informed decision is still the best way to get the right policy for you. If you need further assistance in selecting the right life insurance policy for you, contact us today.