Most everyone believes that they understand term life insurance. But when it comes time to purchase it, many express false assumptions about the product and process. Here are 12 Myths that are commonly expressed.
1 – Twice My Salary is More Than Enough Life Insurance
While 2x salary may very well be sufficient, the amount of life insurance you need is specific to your situation. Generally, 8-10 times your income is a good rule of thumb. Most people don’t really analyze what their family might need sufficiently. Seeking the advice of a licensed professional is generally a good idea.
2 – I’m too Young to Worry about Life Insurance
The younger you get coverage, the lower your premiums will be. The longer you wait, the more likely you are to develop medical conditions that exaggerate the premium cost to you. If you buy when you are young and in great health, your premium is locked in – even when you convert to another life insurance product in most cases.
3 – Employer Provided Life Insurance is all I need
Many employers provide group life insurance to employees. While this may provide a healthy baseline, many experts recommend 8-10 times your income in coverage to safeguard your dependents’ future needs. And these policies can rarely be taken with you if you leave employment.
4 – I will get a better deal if I visit with an agent
Individual life insurance rates are filed with state regulators, and remain the same for both online purchases or with an insurance agent. What might be important to you, is that you see the rates of multiple insurers so that you make an educated choice when you purchase. This can be done through an agent, or except when visiting a specific insurer’s website to get your quote, online as well.
5 – Everyone needs Life Insurance
For most people, life insurance actually is a necessity. But if you have sizable assets and no debt, or if you have no dependents or heirs you want to provide for, you are probably better off “self-insuring.” Save enough to cover your final expenses (affairs settlements and funeral expenses), and you won’t need life insurance under the conditions we’ve outlined here.
6 – I don’t need to worry about my Health when getting Life Insurance
Insurance companies gauge the risk of all applicants. high risk to the insurer means high premiums, often for low coverage policies. It could also mean that you cannot get higher coverage amount policies at all. Fit individuals have a very high likelihood of getting the best price and the most coverage, as their health markers usually indicate that they are likely to live a long and enjoyable life.
7 – Everyone should buy Term Life Insurance and Invest the Difference
Buying term life insurance and investing funds elsewhere isn’t right for everyone. Providing for a special needs child or covering estate taxes are two typical reasons to have a permanent insurance plan. While Term Life insurance is the cheapest life insurance option in almost all cases, there are reasons to seek other types of life coverage. Consult with an advisor if you are unsure.
8 – The Life Insurance Medical Exam and Evaluation are just Formalities
Your health history is instrumental in setting your premium. Occupation, hotties, medical history, family history, and driving record give an insurer a window into your health and even your likelihood to put your life at risk. All of these are factors in setting your premium. For healthy and fit individuals, you could see premiums that are less than half of those paid by the average insured.
9 – I don’t need Life Insurance, I’ll just Invest my Money
There is a point in time for some people where investments have amassed enough volume that they don’t need life insurance any longer. For most younger Americans (25-50 is a good rule of thumb, there are of course many exceptions), accumulated savings and investments would do little more than cover final expenses. If your investments do not meet the needs of your loved ones, you may need life insurance.
10 – Life Insurance is Really Expensive
Most people tend to over-estimate the cost of life insurance by 3 to 8 times the actual cost. The low rates can be surprising. To find out just how low rates are for fit and healthy individuals, visit MY LIFE COVERED.
11 – My Life Insurance Premiums are Tax Deductible
In most cases, premiums are not tax deductible. But the good news is, since your premiums cove from after tax dollars, the entire value of your life insurance is paid to your beneficiaries, non-taxable. Contact your tax advisor regarding questions about possible income, estate and gift tax consequences.
12 – Only the Breadwinner needs Life Insurance
Most people think that since a non-working partner makes no income, there is nothing there to insure. However, the loss of a non-working partner would create a need for additional services to care for your family, such as children. In addition, life insurance allows the surviving partner to take some unpaid time off work to help the family adjust to their loss.