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3. Forgetting to update crucial personal information
Policyholders frequently forget to update beneficiaries after a major life change, such as a marriage or divorce. Consider this: Even if you split up with a former husband or wife and remarry, if you haven't changed your beneficiary and you die, your ex-spouse is entitled to all your life insurance proceeds.
Other policyholders forget to tell their life insurance company that they have moved or changed banks. So suddenly, insurance bills aren't being received or monthly electronic bank drafts for insurance premiums aren't being processed.
"That happens all the time," says Woodbury. "It's one reason why every year we contact every client to go over a checklist of items to make sure everything is correct, like named beneficiaries, banking information and even our clients’ addresses."
"It's hard to pay an insurance bill if you don't get it," Woodbury notes. Nonetheless, if missed bills result in a lapsed policy, people who have to re-qualify to buy life insurance may risk paying higher life insurance rates.
Pages in this slideshow:
- 5 ways to screw up your life insurance
- 1. Neglecting to tell your beneficiaries that you even have life insurance
- 2. Buying life insurance to benefit multiple people but naming only one beneficiary
- 3. Forgetting to update crucial personal information
- 4. Repeatedly dipping into the cash value of your life insurance
- 5. Dying with a large, underutilized cash value