7 Killer Insurance Mistakes You're Probably Making

Why you should take out more insurance, not less.

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Thinking that it's too expensive. Many people mistakenly think life insurance is prohibitively expensive, says Bonvento, but it's possible to find a policy that fits your needs—and your budget. Term insurance, which provides temporary insurance over a specific time period, is more affordable than permanent insurance, which lasts a lifetime. In addition to managing financial risk, people sometimes use permanent insurance as an investment tool, as well.

But those on a tight budget tend to choose term insurance. One of Bonvento's clients, a married man with one child and another on the way, decided he needed to take out $1.5 million worth of term life insurance. His monthly payment, pending an assessment of his health, will cost between $102 and $219 per month.

Forgetting to update it. While major life events, such as the birth of a child, marriage, or divorce, usually mean it's time to update your insurance policy, many people forget to do so. Even Sept. 11, which affected many of Bonevento's clients, did not serve as the motivator he thought it would. Then, he says, "when tragedy strikes, they face financial problems on top of everything else."