NEWS & ARTICLES

Life Insurance Is A Complicated Product

Life insurance can be extremely confusing. Naturally, a lot of myths surround it. Even term life insurance policies have several elements that must be carefully considered before you can arrive at the right type and amount of coverage. Determining how much coverage you need and why can be a thought-intensive process.

Life insurance is probably people’s least favorite insurance. People don’t like to think about their deaths, and they don’t like the prospect of dealing with a slick sales agent bent on shoring up fear and selling you a policy that only pays off if you die. Yet, life insurance is a product almost everyone should have. Those with a family or people who depend upon them need to especially heed this warning.  Not having life insurance can severely hurt your family’s well being after you’re gone.

Life insurance does not need to have a negative connotation.  Life insurance is very versatile, and it can even be used as an investment while you are alive.  Let’s look at ten big misconceptions & myths surrounding life insurance. Life insurance myths can be dangerous to believe. Believing them can be devastating to your family’s well being. Even if you don’t have a family, they can be devastating to your legacy.  Here are the 10 common myths about life insurance.

Myth #1: I Don’t Have Any Children, So I Don’t Need Life Insurance

It’s not just your children you have to think about when you think about life insurance. Life insurance will cover the costs of personal debts, medical, and funeral expenses after you’re gone. If you are uninsured, you may leave a load of debt for your family to deal with. A single person might even choose to leave their policy money to a charity or cause.  Even without kids, a spouse will need life insurance benefits to make up for the lost income of the other deceased spouse.  Plus, most people want a spouse to be comfortable and not have any financial worries if they have an untimely passing.

Additionally, the cost of life insurance increases significantly as you age, and if you have certain health problems you may not be able to qualify for any life insurance coverage later in life!  Even if you do not have a family today, you may need the coverage at some point in your life.  A starter life insurance policy is usually not expensive, it guarantees that you have coverage, and many policies give you the option to purchase more life insurance at later dates, regardless of any changes in your health.  Everybody should have some life insurance coverage, whether you have children, a spouse, or not.

Myth #2: I Don’t Need Life Insurance. It’s Taken Care Of Through My Employer.

Having life insurance through your employer is awesome, but it’s just temporary coverage. If you ever leave that company, the coverage will end. Do you really want your life insurance tethered to something like a job? What if your company engages in downsizing? What if you find a better job and quit? It makes a lot more sense to search out a life insurance policy that will stay with you no matter what, no matter where you work.

A life insurance policy paid through your employer typically offers a coverage amount equal to your yearly salary or a small flat amount. That might not be enough for your family. Your loved ones are going to have to deal with medical bills, funeral bills, and maybe even debts and a mortgage. Your employer-provided life insurance package might not cover that.

You might need ten or 20 times your yearly salary for your family to be fine.  Many life insurance policies offered through an employer provide something like $50,000 of coverage.  Most people will need hundreds of thousands or more in coverage.  Life insurance preferably will provide enough coverage to send your children to college, provide a solid retirement fund for a spouse, and make up for the lack of income from the deceased person.  This amounts to a tremendous amount of coverage.  Luckily, most people can attain this coverage very affordably.

Myth #3: Life Insurance Is Just Too Costly

Most people think life insurance is too expensive. Think about this: A 40-year-old person who doesn’t smoke can get half a million dollars of coverage with a premium that won’t change for two decades, for about $30 a month. All you’ve got to do is give up $5 coffee a couple days a month, and your kids are taken care of for life if you die.

Myth #4: People In Poor Health Can’t Get Life Insurance

A lot of insurance companies are willing to sell policies to individuals with a number of medical conditions.
There are some carries that even specialize in certain high-risk groups. The coverage might be a little bit more expensive than for someone in tip-top shape and perfect health, but companies will work with you to get your coverage set up. The most important thing is to be honest about your health upfront.

Myth #5: Term Life Insurance Is Always The Best Option

A term life insurance policy, by definition, lasts for a set period of time, so if you pass away after that period and don’t renew your policy, it’s just not there for your family & children anymore. The option that might be best is a combination of term and whole life or universal life.

Term life insurance usually gets more costly as time passes. Insurance companies make more when their customers are on term policies because the majority of people don’t die during the terms they are getting coverage for. On the other hand, whole life insurance or universal life insurance is an investment that will definitely pay off, and you will always pay the same premium no matter what.  That being said, term does provide a lot of coverage for the dollar amount, so for some people it is appropriate.

Myth #6: Life Insurance Is Only A Good Idea For People With Dependents

Even if you’re single without children, you should still think about whether you need life insurance. Others may still need you, like parents, and life insurance can cover serious expenses like funeral arrangements and medical bills.

Myth #7: Lifestyle Won’t Have An Effect On Your Insurance Premiums

Lifestyle has a big impact on life insurance premiums. Usually the healthiest people see the lowest premiums.  Other things that affect premium costs include lifestyle choices like drinking, smoking, hobbies, and occupation.  People who keep their cholesterol and blood pressure in check will often qualify for the lowest premiums.  That being said, not many people are in perfect health, and insurance companies expect this.  Most everyone can qualify for affordable health insurance as long as they have not had cancer or a heart attack.  If you have experienced a major health event such as that, you might have to look at special high risk insurance policies.

Myth #8: You Absolutely Must Have Life Insurance

While insurance is a good idea for a lot of people, those who have big assets and no debt or children could be better suited to self-insurance.  Before choosing this option people should speak with an estate planner or financial advisor, because life insurance can be used to offset taxes or more effectively transfer assets tax free to the next generation.

Myth #9: The Cost Of My Premium Will Be Deductible

Your personal insurance cost is never deductible if you get it through an employer.  Any benefits paid are usually tax free.

Myth #10: Only The Main Breadwinner Needs To Get Life Insurance

There’s a lot more to think about than salary when it comes to considering how much insurance each parent needs. Housekeeping, extra-curricular activities, and cooking will all cost a little extra if the there is one less person to help.  Stay-at-home parents provide valuable services that have a monetary value, too. Cooking, cleaning, driving the children around, and help with schoolwork are all quantifiable costs that must somehow be paid for. Who will the father hire to take care of all that stuff if the wife is gone? What if the woman is the primary breadwinner and the father is a stay-at-home dad? It’s time to rethink life insurance coverage if you’re stuck in thinking from generations past.

Conclusion

It’s crucial to dispel myths about something as important as life insurance. Your children deserve to be taken care of after you’re gone. You shouldn’t be discouraged away from getting the life insurance your family needs.