| 1. Waiting. The best life insurance price you will ever | | | | name a back-up beneficiary. Unlike your estate, the |
| get is the one you will receive right now. The longer | | | | back-up beneficiary will receive the death benefit |
| you wait, the more you will pay, because life insurance | | | | tax-free and without having to go to court. Solution: |
| prices are pegged to your age and health. The thinking | | | | Designate back-up beneficiaries. |
| is that younger people live longer, so they will make | | | | 5. Not updating the policy. Life insurance policies last a |
| more payments with less risk of a benefit payout. | | | | long time, and many things can change while they are |
| Solution: Act now. | | | | in effect. Marriage, divorce, having children, losing a |
| 2. Missing the tax break. Life insurance premiums can | | | | parent-all of these can affect your choice of |
| be paid with pre-tax dollars. If you are self-employed | | | | beneficiaries and back-ups. Solution: Revisit your policy |
| or work for a company that offers a Section 125 plan | | | | regularly. Set an annual date as a reminder. Use your |
| or Flexible Spending Account (FSA), you can use | | | | birthday, April 15 (tax day), Thanksgiving, or any other |
| pre-tax dollars to pay for life insurance. This will | | | | day that seems appropriate. |
| increase your buying power an average of 34%, since | | | | 6. Not getting enough coverage. Life insurance is |
| you will be paying with dollars that have not had | | | | forward-looking; you have to forecast how much |
| federal income tax (20%), Social Security tax (7.65%), | | | | money will be needed in 20, 30, 40 years or more. If |
| or state income tax (6.5%) withheld from them. | | | | you forecast in today's dollars, the benefit will likely be |
| Solution: Check to see if you qualify. | | | | smaller than is necessary to leave the kind of legacy |
| 3. Not making a person your beneficiary. If you make | | | | you want. Solution: Buy a little more coverage than you |
| your estate, rather than a person, the beneficiary of | | | | think your beneficiary(s) will need. |
| your policy, then the death benefit will be reduced by | | | | 7. Outliving the policy's term. It isn't the outliving that's |
| inheritance taxes. If you make a person the | | | | bad, of course; it's having the coverage come to an |
| beneficiary, he or she will receive the benefit tax-free. | | | | end. This only happens with term life insurance, |
| Naming your estate as the beneficiary also means the | | | | because it covers you for set number of years-10, 20, |
| death benefit will be tied up in probate court. An | | | | or 30. When the term ends, the coverage ends. This is |
| individual will receive the death benefit quickly, enabling | | | | not the case with whole life insurance. As the name |
| him or her to meet immediate expenses without | | | | suggests, whole life covers your whole life. It is more |
| borrowing. Solution: Name a person as your | | | | expensive than term life, however, so some people |
| beneficiary. | | | | opt for term life until they can afford a whole life policy. |
| 4. Not naming back-up beneficiaries. If your beneficiary | | | | Solution: Discuss your options with your family and |
| dies before you do, even by a few minutes, then the | | | | insurance agent. |
| death benefit will be paid to your estate-unless you | | | | |