Top 6 Life Insurance Myths Debunked

Since death is inevitable, it is paramount to plan for the financial security of your loved ones after your demise. This is where life insurance comes into the picture. Despite the popularity of life insurance, lots of myths are associated with it.

In this post, we will debunk 6 common life insurance myths.

1. Only married, working parents can enjoy life insurance

Numerous individuals believe that life insurance is only meant for married, working people with children. But this is not true as life insurance is suitable for a wide range of situations. Life insurance can be highly beneficial to a married couple without a kid provided the surviving party will have financial difficulty if the other person is dead. This is especially essential if one party depends on the other financially.

Given this, life insurance is crucial for a stay-at-home parent as the death of their working spouse can change childcare arrangements. With the aid of a life insurance policy, the stay-at-home parent can get the death benefit to cater to childcare and other things for raising a family.

Additionally, young, single individuals can also consider a life insurance policy. This is because lots of young individuals have debt that will be transferred to co-signers when they are dead. But if they have life insurance, co-signers don’t have to deal with the burden of the debt. Besides, singles can enjoy the long-term benefits of life insurance if they would start a family in the future.

2. Life insurance is expensive

According to the 2020 LIMRA Insurance Barometer study, many millennials and other people assume that life insurance is expensive. Factually, a healthy 30-year-old male may be required to pay a monthly rate of about $20 for a $500,000 policy. A $1,000,000 policy will cost the same person a monthly rate of about $34.

Therefore, it is essential to note that life insurance isn’t expensive. Furthermore, lots of companies have various offers; hence, you can easily shop for what suits your budget. In addition, you can get more affordable life insurance options by buying one when you are still young and healthy. In reality, if you delay the purchase of life insurance, you may have to pay thousands of dollars more in the future.

Also, to reduce the cost, you may want to go for a term life insurance policy. Unlike permanent or whole life insurance, term life insurance allows you to pay a fixed rate for a predetermined period, often about 10 to 30 years.

3. Poor health and age will not allow me to get life insurance

Of course, good health plays a key role in getting higher life insurance coverage at an affordable rate. But other factors also affect insurance coverage. Besides, certain insurance companies are focused on taking care of the needs of people with pre-existing conditions or health issues. Similarly, losing weight, quitting smoking, and imbibing other positive health habits can help you to get more coverage. There are even special rates for life insurance with type 2 diabetes.

If you don’t want to undergo a medical exam because of COVID-19 or other reasons, you can find insurance companies that provide insurance policies without a medical exam. Although such insurance policies will be likely more expensive and may demand comprehensive health information, they are recommended for older people that don’t want a medical exam. Therefore, you can find affordable insurance policies even if you are older than 50.

Matt Schmidt with Burial Insurance Pro mentions “Many people in average or below average health cannot only be approved for life insurance, but their rates will be very inexpensive. Life insurance companies have repriced their policies, and the underwriting criteria is very favorable to the riskier applicants.”

4. Insurance should be twice my annual salary

Factually, there is no one-size-fits-all method for determining the amount of coverage each person needs. Basically, your particular situation will determine the coverage amount as it will help in deciding the amount required by your loved ones in case of your death. Possible medical bills, burial costs, and funeral expenses will also be put into consideration by insurance companies.

While it can be quite difficult to calculate the needs and expenses, a life insurance calculator can be quite helpful. The calculator will consider the following things:

• Your current income

• Your existing debt

• Your existing savings or assets

• The number of kids you have and whether money is required for their college education

• Your family’s income needs per month

5. Employment-based life insurance is enough

Lots of individuals get life insurance through their employment. Such people may not think about getting other options because of the group rate price and convenience of employment-based life insurance. Unfortunately, the coverage of employment-based life insurance is likely lower than what you need. This is particularly true for people with a family who may not have an opportunity to get other forms of higher coverage.

Also, job security is a problem for employment-based life insurance. Changing or losing jobs may void your employment-based life insurance. Therefore, purchasing individual life insurance could be more reasonable at the end of the day. Regardless of your employment situation, you can still maintain an individual life insurance policy.

6. Life insurance is more advantageous than savings

Without mincing words, having savings can be important for taking care of future expenses. But it is noteworthy that life insurance plays a different role from savings. Most people cannot save as much as $250,000, but their loved ones may need such a huge amount after their death.

Besides, even if you are able to save lots of money now, some unforeseen circumstances may force you to spend a large share of your savings in the future. However, with a life insurance policy, you don’t have to worry about these issues. The policy can offer money for your loved ones to cover your burial costs, settle existing debts or mortgages, and even take care of their living cost. Also, since there is no tax on life insurance, your loved ones will have access to the total insurance payout.

Conclusion

Although buying a life insurance plan can be quite daunting, knowing the myths about life insurance can ease the process. So, start planning for the future of your loved ones after your demise by getting life insurance coverage that fits your specific condition.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes