Myths About Life Insurance

Death and pushy life insurance agents are two things most people would probably rather not deal with. Here are some common myths to steer clear of:

Everyone needs to have life insurance
Life insurance has two main functions. The most common is to provide for people who are financially dependent on you like children and perhaps a spouse. The second is to pay estate taxes so that your heirs won’t have to sell property or a business to do so.

If you don’t have dependents or a taxable estate (currently over $5.12 million), you may not need life insurance. If you don’t currently need life insurance, you may still want to purchase it now. That’s because if your health deteriorates, it could be a lot more expensive or you may no longer be able to purchase it at all when you need it.

You need life insurance to pay off your debts
This is a common myth. Many people are concerned about their heirs inheriting their credit card or other debt they may have accumulated. While debts can reduce the inheritance that you leave your heirs, excess debt dies with you unless the debt was joint, community property or had a co-signer/guarantor.


Everyone needs life insurance to pay for your funeral and other final expenses
Purchasing a life insurance policy for this purpose can be the most expensive way to fund it. If your heirs will be inheriting any savings or other liquid assets, they can always use them to pay these costs. But if your debts wipe out your estate, a small final expense policy may make sense to avoid leaving your heirs with this burden.

Everyone needs enough life insurance to fully replace their lifetime income
Life insurance agents tend to love using this method of calculating life insurance needs because it’s quick and generates large amounts of insurance needs. But do you really need to replace your entire income for the rest of your working life?

You don’t need to worry about your life insurance policy after you purchase it
People tend to buy life insurance and then forget about it but a change in your financial situation or a birth, death, marriage, or divorce in your family could require you to update your beneficiaries or the amount of insurance you need.

Protecting your family is important but so is making sure you’re not wasting money on insurance that could be used for other financial needs. The key is to find the right balance for you. Don’t let these common myths throw you off.