Five Biggest Mistakes Families Make with Life Insurance

sponsored by Midland National

The month of September is Life Insurance Awareness Month.  While it’s still a few months away, it’s not too early to start protecting yourself today. Most families are getting tons of information thrown at them around the topic of investing, far too often I see families make major mistakes when it comes to life insurance.   I had a widow come to see me just a few months ago when her husband had a tragic accident.   He left her with three young children and a $500,000 insurance policy.   With hardly any other saved money, she was left bewildered on how she would be able to make her bills, pay for her kids’ college education, and then also take care of her retirement.   While $500,000 seemed like a lot money at the time they applied for the insurance, in reality it was barely enough to get by given all of the family goals.  Here are the five biggest mistakes that families make when it comes to life insurance.

  • Not Reviewing Beneficiaries – When individuals make a beneficiary designation, they often don’t realize it is a contract of law. No matter what your will says, this is where the money will be going.  Insurance policies allow for both a primary beneficiary and a contingent beneficiary which is highly recommended to be filled out.  As your life progresses and your family situation changes with new children or a divorce, it is important to update these beneficiaries.
  • Picking the Wrong Amount of Insurance – Insurance can generally be rented or owned, with term insurance being the insurance that you rent.  Midland National® Life Insurance Company is a strong and established life insurance company, and they provide affordable, temporary coverage with level term insurance in increments of 10 year, 15 year, 20 year, and 30 year levels.   The main issue is that most families often only buy enough term life insurance to pay off their debts.  You should be doing both a needs analysis and a human life value analysis to figure out exactly how much life insurance you need.  What will the cost of college be for your children?  How much money will your spouse need to maintain your family’s standard of living?  Will you pay off the mortgage?  All of these are important questions?
  • People Think They Will Be Healthy Forever – Most families only buy term insurance, but you should have a strong consideration to get some level of permanent insurance. Even though many term insurance policies are guaranteed renewable and non-cancelable, the cost for the new premium when your term renews might be incredibly expensive.   Permanent insurance comes in all sorts of flavors, including whole life insurance, universal life insurance, indexed universal life insurance, and variable universal life insurance. If you are looking to have insurance forever and build up money for college education, for example, check out this great video.  Remember, if your health changes in your 40’s or 50’s you may not be eligible to get permanent insurance down the road.
  • Only Using Insurance Through Work —Although it can be a very cost effective strategy to get your term life insurance at work, the main problem is that the life insurance isn’t generally portable if you leave work. This means if you change jobs or move to a new employer, the new employer may not have the same level of coverage you had at your old employer, and it is possible your health had changed since you joined your employer.  It is important to consider some level of term or permanent protection on your own.  Remember, the longer you wait, the more costly the proposition will be down the road.
  • Not Factoring Inflation — If you buy a $1,000,000 insurance policy when you are 35 years old, what is it worth when you are 55 years old? People often under-insure themselves when they are younger by not factoring in the silent killer of inflation.   Make sure as you get older or when you think about how you structure your insurance policies, you consider this factor in your overall financial plan.

These are absolute ‘musts’ to consider when picking life insurance. While not a necessity, it’s helpful to consider providers with informative resources and communities that openly discuss what’s best for families and individuals. Midland National maintains a strong, interactive network of customers.  You can find Midland National on Twitter as well as Midland National’s page on LinkedIn.  If you are on Facebook, you can connect with Midland National. Midland National Life Insurance Company, part of the Sammons Financial Group also provides a wide range of financial and life insurance related videos or you can follow along on the Midland National blog and keep up to date on all Midland National company updates that help customers learn more about financial products, financially-stable living, and gives transparency into its business.

oXYGen Financial, Inc. co-CEO Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.

TED JENKIN IS SECURITIES LICENSED THROUGH INVESTACORP, INC. A REGISTERED BROKER/DEALER MEMBER FINRA, SIPC.  ADVISORY SERVICES OFFERED THROUGH INVESTACORP ADVISORY SERVICES, INC. A SEC REGISTERED INVESTMENT ADVISORY FIRM. Linked sites are strictly provided as a courtesy. Investacorp, Inc., and its affiliates, do not guarantee, approve nor endorse the information or products available at these sites nor do links indicate any association with or endorsement of the linked sites by Investacorp, Inc. and its affiliates.    oXYGen Financial, Inc and Ted Jenkins are not employees of Midland National Life Insurance Company.  The opinions and ideas expressed by them are their own and not necessarily those of Midland National or its affiliates.  Midland National does not endorse or promote these opinions and ideas nor does the company or agents give tax advice.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed as to accuracy. All presentations are for agent representative use only and cannot be used, in whole or part, with consumers.

About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves

Hey!

My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

Background and qualification information is available at FINRA's BrokerCheck website.

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