3 Signs You Are Paying Too Much For Life Insurance

3 Signs You Are Paying Too Much For Life Insurance

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Overpaying for life insurance can mean less money to do other things.


Key points

  • Life insurance is an essential purchase for many people.
  • Consumers don’t want to pay more than they need to for life insurance.
  • These signs may suggest that a policy is more expensive than it should be, including having a greater death benefit than you really need.

The protection that comes with a good life insurance policy is invaluable. With the right coverage in place, policyholders can ensure that their death does not cause financial devastation for their surviving loved ones.

But while full coverage is essential, it’s not a good idea to overpay. This is especially true as these policies are expected to remain in place for decades. With long-term coverage, paying higher life insurance premiums could come with a large ongoing cost.

It can be difficult to tell when a life insurance policy is too expensive. But consumers should pay attention to these three red flags which may suggest their insurance coverage is costing more than it should.

1. You have a whole life plan

Whole life insurance policies are much more expensive than term life plans. Often the rewards are five to 15 times higher.

This large additional expense might be worth it if most people need life-long insurance coverage, but they generally don’t. Insurance is meant to replace income, pay off debts and provide for dependents. And at some point, most people stop earning, pay most of what they owe, and no longer have people relying on their earnings, so they don’t need coverage anymore.

Term life policies cost less and only offer coverage for a set number of years, so premiums are lower and coverage can end when it is no longer needed. This means that a term life policy is probably the best choice for most people.

Some people even justify paying more for a full life policy because this type of insurance has an investment component and term life policies don’t. But the reality is that better returns can be earned elsewhere and this is generally not a good reason to pay more for whole life coverage.

2. You have a greater death benefit than necessary

Life insurance costs are higher for people with higher death benefits. After all, insurers take more risk when they agree to pay more money in the event of death.

While it may seem like a good idea to leave family members a fortune after an untimely death, this is not the purpose of life insurance. Paying extra premiums to provide funds beyond what loved ones would need to maintain their standard of living is just a waste of money.

3. You haven’t looked around for coverage

Finally, another important red flag that life insurance coverage is unnecessarily expensive is if the policy was purchased without comparing premiums.

There is a lot of variation in costs from one insurer to another and people who don’t look around and compare all of their different policy options could sometimes find themselves paying substantially higher bills for coverage.

There’s no reason to overpay for insurance when it’s so easy to compare rates online. That’s why most people should get quotes from multiple insurers for a term life policy that provides an adequate amount of death benefits.

This way, you can avoid overpaying for coverage while still getting crucial protection that could save surviving family members from the disaster.

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