Mistakes to Avoid When Buying Term Life Insurance
Are you a fan of Dave Ramsey? If you are, then you likely know he’s not a fan of cash value life insurance. To be more explicit, he hates cash value and does not recommend it. Instead, Dave Ramsey endorses term life insurance over whole life insurance. But don’t just go out and by a term policy on his recommendation alone! You need to make sure you buy the right policy that fits your needs. Not only that, you need to avoid the most common mistakes people make when buying term life insurance.
Mistake #1: Not Buying Enough Insurance to Replace Income
If you obtain life insurance through your workplace, it may not be sufficient. It might only be one year’s worth of coverage, and you need at least ten to twelve times your income in life insurance.
Plus, if you’re the breadwinner in your family, then you need to plan for your spouse and kids when you’re not there to take care of them financially. The best way to take care of your family after you die is with life insurance. You need to ensure that you have sufficient coverage so that they can live comfortably without your income. However, the breadwinner shouldn’t be the only one with life insurance; even a stay-at-home parent needs life insurance. Put simply, both spouses need life insurance.
With the insurance proceeds, you can invest and earn a rate of return that replaces your lost income and provides security.
Mistake #2: Waiting Too Long to Buy a Policy
The longer you wait to buy term life insurance, the more consequences you face. If you wait until the last minute, then you could leave your family financially vulnerable if something were to happen to you. Instead of waiting, you should act now so that you can benefit from having lower premiums. Generally, premiums increase as you get older because you’re more at risk for health issues.
A common misconception is that people think they should wait to buy term life insurance until they are debt-free. However, that is when your family is at their most vulnerable, because when you’re debt-free, you begin to think that you don’t need life insurance. Everyone needs life insurance.
Mistake #3: Not Getting a Long Enough Term
People commonly try to save money by buying a shorter term. However, what if you end up having medical issues after your ten-year term is over? Your medical issues will raise the cost of your next policy, or worse, it could prevent you from getting any coverage at all.
This is why Dave Ramsey, along with other financial advisers, suggests a 30 to 20-year term. Ideally, you should choose your term based on when your kids will be leaving for college and living on their own. For instance, if you are planning to have children in the future, then consider purchasing a 30-year term. Moreover, if you have just had a baby and don’t expect to have any more children, then a 20-year term makes more sense for you.
Mistake #4: Adding Too Many Policy Riders
While policy riders can sometimes enhance coverage, adding too many often does more harm than good. Each rider increases your premium, and in many cases, the added cost outweighs the actual benefit you receive. Some riders are marketed in ways that appeal strongly to emotions—such as fear of illness, injury, or unexpected loss—rather than offering meaningful, long-term value. Common examples include income replacement, waiver of premium, critical illness, and accidental death riders. Although these options may sound appealing, they frequently provide limited payouts, restrictive conditions, or overlap with coverage you may already have elsewhere. Before adding riders, it is important to understand exactly what they cover, how often they pay out, and whether the additional cost truly aligns with your financial goals.
Mistake #5: Not Reviewing Your Policy
Life insurance is not a “set it and forget it” purchase. As your life evolves, your financial responsibilities and coverage needs change as well. Failing to review your policy on a regular basis can result in being underinsured, overinsured, or paying more than necessary. Major life events—such as buying a home, getting married, having a child, receiving a promotion, improving your health, or going through a divorce—can all impact the type and amount of coverage you need. Regular policy reviews help ensure your beneficiaries are still properly protected, your coverage aligns with your current income and debts, and you are taking advantage of potential savings opportunities. A periodic review allows you to adjust your policy proactively rather than discovering gaps or inefficiencies when it is too late.
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This article was updated on 12/22/25.