6 Common Life Insurance Myths Debunked

Death is not an easy thing to think about or prepare for, but with the uncertainty of the future, it is important to consider the financial security of your family and loved ones if something were to happen to you. Life insurance can often be confusing to people, and some things that you may think are “common knowledge” about life insurance are actually just myths. As September, the Life Insurance Awareness Month (LIAM), comes to a close, we want to set the record straight about some of these misconceptions and help you make a properly informed decision about life insurance. Here are the most common myths about life insurance and the facts you should know instead.

Myth 1 – Life insurance is only for married, working parents

Many assume that the only people who need life insurance are working parents who have children. While life insurance would greatly benefit those in this demographic, there are many other situations in which life insurance should be considered. For a married couple with no kids, life insurance may be a necessity if things would not be financially stable for the surviving party in the case of a death. Especially if one spouse is financially dependent on the other. This is also a reason why stay at home parents should consider life insurance. Stay at home parents have just as much of a job as a working parent, and their death would likely bring about sudden needs for childcare. If a life insurance policy has been taken out on the stay at home parent, the death benefit can be used to cover continued childcare and other family-raising costs for the other parent. Even young, single people can benefit from taking out a life insurance policy. Many young people have some form of debt, and any cosigners to that debt will become responsible for paying it off in the case of death. Life insurance can help alleviate that burden from the other cosigning party or family members as it can be used toward debt payment and other similar expenses. Additionally, single people who one day want to start a family can benefit from obtaining life insurance early and locking in a much cheaper rate while they are younger.

Myth 2 – It’s too expensive

The 2020 LIMRA Insurance Barometer study reveals that many people, especially millennials, continue to overestimate the cost of life insurance, sometimes by hundreds of dollars. In reality, the monthly rate of a $500,000 policy for a healthy 30 year old male can easily rest around $20, or around $34 for a $1,000,000 policy. With this in mind, life insurance can be much more affordable, and with a multitude of companies with policies that vary in price in coverage, there are often many options to choose from. It is also to your benefit to act sooner rather than later as the younger and healthier you are, the more likely you are to obtain life insurance at a low rate. In fact, delaying the purchase of a life insurance plan could be costing you thousands of dollars in the long run. Additionally, you may want to consider term life insurance which is a much more affordable alternative to whole or permanent life insurance, as you pay a fixed rate for a set term, usually of 10 to 30 years.

Myth 3 – Poor health and age will prevent me from getting life insurance

Good health is clearly important when it comes to life insurance, as you are more likely to qualify for higher coverage at a lower price. However, coverage is based on a variety of factors, and some insurance providers offer policies with coverage to individuals with health concerns or preexisting conditions. Additionally, taking steps to get in better health such as quitting smoking or losing weight can often increase your likelihood of obtaining more coverage. Furthermore, for those who are anxious about getting a medical exam in the wake of COVID-19, or do not want their health condition evaluated in-person, many life insurance companies offer policies which do not require a medical exam. These policies may be more expensive and still require extensive health information, but are a great alternative option for older life insurance applicants and those who need to forgo the medical exam. While it is also true that seniors may have a harder time finding life insurance, it’s not too late to get life insurance in your 50s and 60s, and many companies offer affordable term policies to fit your needs.

Myth 4 – Coverage should be double my yearly salary

This myth is often cited as a rule of thumb, however, the amount of coverage you actually need will depend on your specific situation as it should answer the question of how much your family and loved ones will need at the time of your death. The amount of life insurance coverage should be sufficient to cover the cost of living for your family and others that may be dependent on you after your death. You also will want to factor in the chance of medical bills as well as burial and funeral expenses as those will fall on the surviving family members, and are often more costly than expected. Evaluating these expenses and needs can often be difficult and concerning for applicants, but tools such as a life insurance calculator can make this process much easier. This insurance calculator takes into account these details:

• Your current income
• The amount of debt you have
• How many kids you have and whether they will need money for college
• Monthly income needs of your family
• How much you have in assets or savings

With this information, the calculator provides you with a practical coverage estimate based on your unique situation. If you’ve been unsure how to proceed with getting life insurance, this is a great place to start.

“How Much Life Insurance Do I need?” – Try our Free Insurance Needs Calculator

Myth 5 – Employment-based life insurance is adequate

People who have life insurance through their employer might not consider other options due to the convenience as well as the group rate price. However, the coverage from these policies is usually lower than you might actually need, especially if you have a family, and you may not have the option of obtaining a plan with higher coverage. There is also the issue of job security, as this life insurance is not guaranteed if you change jobs, or are laid off. Individual life insurance could be more worth your money in the long run by providing more personalized coverage than work-based life insurance with the assurance that you will never lose your coverage due to unexpected circumstances.

Myth 6 – You’re better off putting money in savings

It’s important to put money away in savings for future necessities, however, life insurance serves a different purpose that savings might not be able to cover. It is unlikely that many have a savings account with $250,000 tucked away, but this amount of money could be very much needed by your loved ones in the case of your death. Additionally, even if you have money saved up now, there is always the case of unforeseen circumstances that require you to dip into and deplete that fund. Choosing to obtain a life insurance plan can not only provide funds for burial costs, but also allow the surviving family members to pay mortgage or debts, and provide for their cost of living. Furthermore, because life insurance money is not taxed, you can be sure that the life insurance payout will not be used for anything except providing for your loved ones.

Life insurance doesn’t have to be complicated

Finding a life insurance policy can seem overwhelming and complicated, but having a better understanding of the process and common misconceptions can make your search much easier. In the midst of COVID-19 and future uncertainty, consider how you can provide for your loved ones even after your death through choosing the financial security of life insurance. At LifeQuote, we are committed to keeping you informed about life insurance and finding you the best policy for your situation. We offer both term and permanent life insurance as well as no exam policies. Contact one of our agents today or visit our online quote generator to get a free instant quote and take control of the future for you and your loved ones.