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Life insurance can be intimidating and complicated. We’re here to help you avoid making any mistakes.

Here are the mistakes to avoid when you buy life insurance.

8 Life Insurance Mistakes to Avoid

  1. Assuming Life Insurance Is Too Expensive
  2. Relying on Your Group Life Insurance
  3. Procrastinating
  4. Lying on Your Application
  5. Not Buying Enough Coverage
  6. Improperly Designating Beneficiaries
  7. Not Reviewing and Updating Your Policy
  8. Not Shopping Around

Mistake # 1 – Assuming Life Insurance Is Too Expensive

Americans believe life insurance is three times more expensive than it actually is. In reality, there’s a good chance that you’ll be paying less for a term life insurance policy than your internet bill.

Instead of just assuming it’s too expensive, run a quote. This is the most common of insurance mistakes to avoid.

» Compare for yourself: Term life insurance quotes

Mistake # 2 – Relying on Your Group Life Insurance

Group life insurance is a great benefit to take advantage of through your employer, but your family only receives a death benefit if you die while you’re still working with that company.

If you quit or are terminated, you lose the group coverage. If you become disabled and can’t work, you lose the coverage.

In addition, employers aren’t required to offer life insurance. They can choose to change benefit programs at any time.

Even if you were to die while having the group coverage inforce, most group life policies offer less than $100,000 in coverage. This money will help your family pay for a funeral and cover some end of life expenses, but if you have a mortgage or dependent children, it’s not enough to replace the income you once provided.

Owning your own term life insurance policy that you can take with you as you change jobs or leave the workforce will ensure that your family isn’t financially devastated if you were to die unexpectedly.

Mistake # 3 – Procrastinating

One of the indisputable facts of the life insurance industry is that the younger you are, the cheaper your life insurance premiums will be.

As you age, the odds that you’ll develop medical issues increases, and once-minor accidents will begin to be more severe as you get older. It’s not fun to think about, but you’re also inching closer to old age every birthday.

Luckily, term life insurance can still be pretty affordable, even after age 50. But you can save quite a bit of money each month if you buy sooner rather than later.

You’ll save a lot of money if you buy life insurance when you first realize you need it. Don’t wait until a close call or health scare occurs.

Term Life Insurance Monthly Rates for a Healthy, Non-Smoker
Age at PurchaseFace Amount30-Year Term (Males)30-Year Term (Females)
30 $250,000$18.06$15.51
$500,000$29.69$24.89
$1,000,000$51.50$39.68
40$250,000$28.11$22.91
$500,000$49.57$39.42
$1,000,000$92.08$72.68
50$250,000 $67.22$51.61
$500,000$125.58$94.91
$1,000,000$240.69$179.12

See what you’d pay for life insurance

Comparison shop prices on custom coverage amounts from the nation’s top carriers with Quotacy.

Mistake # 4 – Lying on Your Application

It can be tempting to omit certain facts about your health, lifestyle, or family history to get lower premiums, but don’t do it. More than likely, the insurance company will discover the hidden information anyway.

When you apply for life insurance, the insurers can verify your information through different sources, such as:

  • Your prescription history
  • Your medical records
  • Your motor vehicle report

When you apply for life insurance, you give the insurance company your medical and lifestyle history from your perspective. But they’ll also review your health history from your doctors’ offices and the results of your life insurance medical exam, if you’re required to get one.

If the insurance company notices any differences between their findings and what you’ve stated on your application, they may deny you coverage if they believe you purposely withheld information.

If you do get away with lying on your application and it’s approved, know that the insurance company has the right to investigate and deny death benefit claims during the first two years the policy is active. If it’s discovered that you lied to get your policy, the insurance company can reduce or even completely deny any payout to your beneficiaries.

The best thing to do when applying for life insurance is to be honest and assume that everything you put on your application will be investigated.

Mistake # 5 – Not Buying Enough Coverage

As mentioned earlier, $100,000 from a group life insurance policy may seem like a lot of money at first glance, but when you factor in the cost of your mortgage, child-raising costs, credit card debt, saving for retirement and your children’s education, it suddenly isn’t very much at all.

Buy as much term life insurance as you can comfortably afford.

If you need some help determining the right amount of life insurance coverage, check out our life insurance calculator. It’s easy to use and will help reassure you that you’re buying the right amount of life insurance.

» Calculate: Life insurance needs calculator

Mistake # 6 – Improperly Designating Beneficiaries

You may think that assigning someone to get the life insurance money after you die is a no-brainer, but choosing beneficiaries can be a little trickier than that. The whole reason to own life insurance is so your income is replaced for the benefit of your beneficiaries. If it’s not set up properly, then it can become a mess.

Do not name minor children or individuals with an impairment as beneficiaries.

If you name your minor child the beneficiary and you die while they are still a minor, a court proceeding will take place to determine what happens to the death benefit proceeds. Probate court can take a long time and cost a lot of money.

Individuals with impairments or special needs should not be named beneficiaries either. Doing so can negatively impact their government benefits such as Medicaid and SSI.

Make sure the insured, beneficiary, and owner are not three different people. For example, if you own a policy on your spouse, do not name a child as the beneficiary. This will be seen as you gifting your child the death benefit upon the death of your spouse and then the government will want their cut in the form of a gift tax.

Be specific about your beneficiaries when you list them on your life insurance policy. In a court case in 2014, a woman named Edna Jean Turgeon listed six beneficiaries, one of whom she dubbed “unborn grandchild”.

The situation was that her daughter, one of her beneficiaries, was pregnant and she wanted to include this unborn child as a beneficiary. The problem was the by the time Edna died, her daughter had given birth to not only one but three children.

Edna never took the time to update her beneficiaries and the court decided that because Edna used the language “grandchild” instead of “grandchildren” that only the first born of the three additional grandchildren was entitled to the death benefit.

Mistake # 7 – Not Reviewing and Updating Your Policy

Life insurance is not a set-it-and-forget-it financial product. Ideally, you want to review your policy every couple years and every time a significant event happens in your life, such as a marriage, divorce, birth, job change, home purchase, etc.

Review and update your beneficiaries, if needed. Also, consider whether you still have enough coverage.

Reviewing and updating your policy is crucial to make sure it’s still set up according to your wishes.

Mistake # 8 – Not Shopping Around

No two life insurance companies are the same. They underwrite applicants a little differently. Depending on your individual risk factors, one company’s rates may be double another company’s.

To ensure you’re getting the best price, work with an independent life insurance broker, like Quotacy. Brokers have contracts with many different insurance companies and can shop your case to find the best rate.

When you apply for life insurance at Quotacy, one of our agents will look over your application before we officially send it to the insurance company you chose online. If a different insurance company will offer you a better rate, we’ll let you know.

Even if you have a medical condition and you think you can’t get coverage, try applying. Don’t assume you’re a lost cause.

If traditional life insurance isn’t a viable option, your agent may have other products available like guaranteed-issue life insurance or accidental death insurance.

Long story short, life insurance is a great product, but having an expert in your corner will help you get the coverage you need at an affordable price. Start by getting a free, anonymous (no contact information required) term life insurance quote today.

Note: Life insurance quotes used in this article are accurate as of September 26, 2022. These are only estimates and your life insurance costs may be higher or lower.

Watch the Life Insurance Mistakes to Avoid Video

About the writer

Headshot of Natasha Cornelius, a life insurance writer, for Quotacy, Inc.

Natasha Cornelius, CLU

Senior Editor and Licensed Life Insurance Expert

Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.