3 Signs You’re Paying Too Much for Life Insurance

3 Signs You’re Paying Too Much for Life Insurance

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Life insurance payouts can mean less money for other things.


Key points

  • Life insurance is an essential purchase for many people.
  • Consumers do not want to pay more than necessary for life insurance.
  • These signs could indicate that the policy is more expensive than it should be, including that it has a higher death benefit than you really need.

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

But while it’s essential to have comprehensive coverage, it’s not a good idea to overpay. This is especially true because these policies are expected to remain in place for decades. With long-term coverage, higher premiums for life insurance can pay high ongoing costs.

It can be hard to tell when life insurance is too expensive. But consumers should be on the lookout for these three warning signs that could indicate their insurance coverage is costing more than it should.

1. You have a whole life plan

Whole life insurance is much more expensive than term life insurance. The insurance premium is often 5 to 15 times higher.

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

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

Some people also justify paying more for whole life insurance because this type of insurance has an investment component and term life insurance does not. But the reality is that better returns can be earned elsewhere and that’s usually not a good reason to pay more for whole life cover.

2. You benefit from death more than necessary

Life insurance costs are higher for people with larger death benefits. After all, insurers are taking more risk when they agree to pay out more money on death.

While it may seem like a good idea to leave family members with assets 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 didn’t shop around for coverage

Finally, another big red flag that life insurance 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 shop around and compare all their different insurance options can sometimes find themselves paying significantly higher bills for coverage.

There’s no reason to overpay for insurance when it’s so easy to compare prices online. This is why most people should get quotes from multiple insurers for term life insurance that provides a reasonable amount of death benefits.

In this way, it is possible to avoid overpaying for coverage and at the same time get essential protection that could save surviving family members from disaster.

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