Common Beliefs and Myths Regarding Life Insurance
If youâ€™ve been thinking about purchasing life insurance, youâ€™ve probably received a lot of advice from people around you regarding the specifics of buying this type of policy–or even whether you should buy it at all. There are tons of life insurance myths out there, along with some real facts thought to be untrue. Letâ€™s take a look at some of the common life insurance beliefs and whether they should make a difference in your decision to buy a policy.
#1: You Donâ€™t Need Insurance If You’re Young with No Dependents
False. There are probably a lot of people who will tell you that you donâ€™t need any type of life insurance coverage if youâ€™re young with no dependents because there is no one relying on you to pay bills.
While you may have no one depending on you, if you die, someone needs to pay for your funeral and leftover bills, student loans, etc. Therefore, you might consider purchasing a term life insurance policy to cover you while youâ€™re young. Itâ€™s less expensive but still will pay for expenses if you die.
#2: The Coverage My Job Gives Me is Enough
Maybe. Depending on the type of coverage that you get from your employer, it may very well be enough. To make this determination, itâ€™s good to do realistic calculations to see what your beneficiaries would need if you died.
Also, itâ€™s good to verify that youâ€™ll be able to somehow keep your job coverage if you leave or are laid off. If you canâ€™t keep it then itâ€™s good to have your own backup policy anyway.
#3: Itâ€™s Good to Insure for an Amount Equal to Twice Your Salary
True. Well, actually itâ€™s good to insure for as much as you can reasonably afford–or an amount that meets the needs of your beneficiary in the long-term. Itâ€™s not easy to say what would be the best life insurance or the perfect amount for each person. After exploring the types out there (term, whole, variable, universal) as well as how much your family needs, you could make the right choice.
#4: Life Insurance Should Always be Mandatory
Maybe. Whether youâ€™re buying term or permanent life insurance policies, both life insurance types are used to ensure policyholders will have enough to pay for expenses left behind for loved ones to handle. In some cases, if the prospective policyholder has tons of money and other assets to leave behind then a life insurance policy may not be necessary.
#5: I Donâ€™t Need Insurance If I Donâ€™t Earn an Income
False. Many people take the homemakerâ€™s role for granted, but if this person dies, it is possible the breadwinner will not be able to pick up the slack in this area. For instance, suppose the homemaker served as the spouse who handled childcare. Now the breadwinner would be responsible for paying out-of-pocket for daycare expenses.
Not to mention the breadwinner would have to pay for funeral and burial expenses out-of-pocket without insurance. All of these new expenses could be very difficult to pay without supplementation.
#6: Term Life Insurance is the Best Because Itâ€™s Cheaper
True and False. There are definite benefits to purchasing a term life insurance policy, including cheaper coverage. However, itâ€™s less expensive because the company is only insuring you for a designated period of time.
If you go with a permanent life insurance policy (one that stretches over your entire life and invests some of your premiums for you) you will pay more initially, but in the long run you could end up coming out on top. This is because the money youâ€™re investing could be returned to you (plus interest) before you die, or it could be used to pay your premiums in your later years.
#7: Shopping Around for Life Insurance is a Good Idea
True. Some may tell you that life insurance costs are not important and that you should focus more on the benefits that you receive as a policyholder. This is true only to an extent. While there may be certain goals that you want to meet, you can still shop within those boundaries.
So if you want to find the right policy, shop around for life insurance rates that suit you. Then youâ€™ll pay the right amount while guaranteeing the best payout for your beneficiary.
There are tons of myths regarding life insurance so it’s good to know what they are and how they relate to your life. This will help you to determine what decisions you need to make when considering your own policy.