Myths On Life Insurance

Life insurance is something that almost everyone needs and not having it when you need it can be devastating to your family’s well being. Here are some of the most common and dangerous myths about this often misunderstood product:

Your employer-provided life insurance is all you need.
You will lose the employer-provided life insurance once you leave the employer. Should you purchase an individual policy, the premium rate is more expensive due to higher age upon entry. In the event of deteriorated health, your application may be denied, loading on premium and/or limitation imposed.

Only the breadwinner needs life insurance.
If something were to happen to the stay-at-home spouse in your family - the breadwinner may need to hire someone to clean and take care of the kids and that can cost a lot of money. Unless your family would have that extra income to spare, you may need life insurance on both spouses. Insurance on the stay-at-home spouse also gives the working parent the opportunity to take time off work and help the family adjust to their loss.

Life insurance is really expensive.
Study conducted by LIMRA, found that 25% of Americans said they need more life insurance but only 10% planned to purchase it within the next year. The main reason given was cost, with 63% saying that it’s too expensive. However, 80% of them overestimated the cost. 25% thought that a $250k 20-year level term policy for a healthy 30-yr old would cost $1k a year or more when it actually would cost about $150.

My health disqualifies me from life insurance.
There are a lot of companies that cover a range of health conditions and some even specialize in high-risk cases. You can also purchase a policy that is not medically underwritten at all. Just be aware that they tend to be more expensive and have lower coverage limits.

Everyone should buy term and invest the difference.
While this generally makes sense for most people, a permanent policy can be a better deal if you need life insurance for your entire life. Some examples would be to provide for a special needs child or to cover estate taxes. For a small percentage of the population, the cash value can also be a good investment if you need life insurance, are in a high tax bracket and have maxed out all your other tax-advantaged options.

You get a better deal purchasing life insurance online.
The Internet can be a great place to research life insurance and find an agent but you actually pay the same price whether you purchase a policy online or through a human being. What you don’t get online is the personal service that can help you figure out how much you need, which company is likely to give you the best price based on your health situation, and what the terms on the application mean.

You’re too young to worry about life insurance.
Life insurance actually makes the most sense when you’re young since the premiums are less expensive and you have fewer assets to pass on to heirs. The longer you wait, the more expensive it will tend to be and the more likely you are to develop a medical condition that makes it much more expensive. Of course, the biggest problem with procrastinating life insurance is that by the time you need it, it’s too late to get it.

Every person’s situation is unique. Some people don’t even need insurance at all. Whatever decision you make when it comes to life insurance, just be sure it’s an informed one. After all, if something does happen to you, you don’t get to come back and relive the day.