You buy life coverage to provide for your loved ones after your death. To make sure your beneficiaries receive what they're owed, avoid these common errors:
To review basic policy features before you make changes, see Understanding Life Insurance.
Common mistakes to avoid
- Lying on your application. Truth hurts, but it can hurt even more if you lie on a life insurance application. Although it might be tempting to deny that you're a smoker or that you've been treated for a particular condition, doing so could make your policy null and void.
- Failing to make premium payments. Missing a payment doesn't always cancel the policy. Insurers typically offer a 30- or 60-day grace period during which coverage remains in force, but extended nonpayment can lapse the policy and affect future insurability.
- Not telling loved ones about your policy. The insurer will usually pay valid beneficiaries, but finding the policy can be difficult if no one knows it exists. Some states run locator services to help heirs find policies, and industry groups provide guidance on tracking coverage.
- Not naming other beneficiaries. If your primary beneficiary dies before you, a secondary beneficiary should receive the death benefit. If no named beneficiaries survive you, the proceeds typically go to your estate, which can complicate distribution and delay payment.
- Suicide. Many policies include a suicide exclusion for an initial period (commonly around two years). If the policyholder dies by suicide during that period, beneficiaries may receive only the premiums paid rather than the full death benefit.
If you're choosing or reviewing coverage with retirement in mind, consider options designed for older buyers and the trade-offs they involve; see The Importance of Life Insurance for Retirees for more information.
If you need personalized help to compare options or review your beneficiary designations, talk to an agent who can explain how a policy will work for your situation.
Frequently Asked Questions
What happens if I miss a premium payment?
Most policies include a grace period (often 30–60 days) during which coverage continues; extended nonpayment can cause the policy to lapse.
Can my beneficiaries find my policy if I don't tell them?
Insurers and some state-run locator services can help, but not all deaths are immediately matched to existing policies, so notifying beneficiaries and documenting policy details is recommended.
How long does the suicide exclusion typically last?
Many life policies have a suicide exclusion for the first one to two years; if suicide occurs during that time, the insurer may limit the payout to premiums paid.