What are some common pitfalls when shopping for life insurance?

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Here are some of the biggest pitfalls when shopping for life insurance.

  1. Mixing your retirement savings with your life insurance. Whole (or permanent) life insurance policies are sometimes marketed as investment products, because they have a cash value that can grow over time. It usually makes better sense to keep your retirement savings and your life insurance planning separate.

  2. Buying too little coverage because you've chosen an expensive product. Whole life insurance is far more expensive than term insurance, so you can't buy as much coverage as you would with term.

  3. Buying too much coverage because you've overestimated how long you'll need coverage. Term life insurance is designed to cover you for a set number of years, usually in your middle years or younger and when you're still in the "wealth-building" phase. Typically as you grow older you have fewer debts and more wealth, which means you won't need as much life insurance. It's important to accurately estimate your needs so you don't buy more insurance than necessary.

  4. Relying on the policy your employer provides without making sure it provides adequate coverage.

  5. Failing to review your financial needs regularly to make sure you have the right amount of coverage.

  6. Not choosing the right beneficiary.