5 Term Life Insurance Mistakes

5 Term Life Insurance Mistakes to Avoid


Whether you’ve followed Dave Ramsey for a day or a decade, you know he hates cash value life insurance and never recommends it. Dave will always say to get term life insurance over everything else out there on the life insurance market!

But even when you’re shopping for the right kind of life insurance, there are still some things you should make sure you don’t do. Here are the top five mistakes people make when buying term life insurance:

1. Not Buying Enough Coverage to Replace Your Income

You should always buy 10–12 times your income in life insurance coverage. That small policy you can get through your workplace (which might be one year’s worth of coverage) just isn’t going to cut it.

If you’re the main source of income for your household, then your family is relying on you to provide for the important stuff: food, shelter and everything in between. If something happens to you, the last thing you want is for them not to have enough to live on.

By making sure you have the right life insurance policy, your loved ones won’t be forced to make huge changes (like sell the house to make ends meet) and can keep going until they figure out next steps.


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Dave recommends putting the life insurance payout into an investment fund so your family could earn a rate of return that replaces your lost income, giving them much-needed financial security.

And don’t forget to get coverage for both spouses. Even stay-at-home parents need term life insurance. Calculate how much coverage they need by estimating what their hard work costs per year (childcare, education, household duties, etc.). Take that total and multiply it by 10 to 12.

2. Waiting Too Long to Get Coverage

If you wait too long to buy life insurance, you leave your family vulnerable if something unexpected happens to you. Term life insurance premiums generally increase as you get older, so buying sooner rather than later can save you money. The older you get, the more at risk you are for health issues. That will increase the cost of your life insurance or even make you ineligible to purchase a policy.

You need to get term life insurance, no matter what Baby Step you are on. Once you’ve paid off your debt and increased your savings, you’ll be on your way to being self-insured in no time.

3. Buying Too Short of a Term

We’re all about saving money. And you might be trying to save a few dollars by choosing shorter term coverage. But what happens if you buy a 10-year policy and have medical issues down the road that raise the cost of your next plan—or worse, make it so you can’t get coverage at all? That will cost you even more in the long run.

Dave’s general rule of thumb is to buy based on when your kids will be heading off to college and living on their own. If you’re in your 20s and plan on having children over the next several years, then a 30-year plan might make sense for you. If you have a few kids in the house and don’t expect any more, then a 15- or 20-year plan would be a better option.

4. Buying Too Many Riders

Some people fall for policy riders sales pitches that increase their premium and pay extra commission to their agents. But these riders offer you very little value.

Common riders might include income replacement, waiver of premium, critical illness and accidental death. Agents will pitch you these extras because they have an emotional value attached to them, but they have little actual benefit.

If there’s one exception to this rider rule, it’s when it comes to your children. If your emergency fund isn’t quite there yet, you should consider getting a rider to insure your children (and it’s what Dave did for years).

This type of rider is one you can add to your term life policy. You can cover all of your kids so you can have peace of mind while you’re building up your savings.

5. Forgetting to Review Your Life Insurance Policy

It’s always a smart idea to go over your term life insurance policy to make sure you have exactly what you need for your current situation. Your coverage might have been fine 10 years ago, but that doesn’t mean it works for you now. (And the same goes for the rest of your insurance coverage.)

Make sure you have enough term life insurance to take care of your changing needs. Maybe you had a child, bought a new home, got a raise at work, quit smoking, or had some other health improvements. These life-changing events can either help you save money or require additional coverage.

Life insurance is a major part of a healthy financial plan, and the right type of life insurance makes all the difference. That’s why you shouldn’t put off buying term life—or you could find yourself in a financial hole one day.

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I have been marketing online for 30 years helping people do it right with education, and list building tools and procedures.