7 Common Life Insurance Myths Debunked
There are so many misconceptions out there surrounding the subject of life insurance that separating fact from myth can sometimes be difficult. It can get so confusing for some that they simply put off obtaining coverage. Since life insurance is essential part of any overall financial plan, we wanted to do our part to clear up any confusion that might be preventing those of you from getting coverage. So we decided to debunk 7 common myths when it comes to life insurance.
Myth #1 Life Insurance Coverage Should Always Equal (insert number here) Times Your Salary – When it comes to deciding how much life insurance you need, many experts out there might tell you that 7 to 10 times your income is a good rule of thumb. But how do they know which particular multiple of income will be the right amount for your particular situation? The fact is that the amount of life insurance coverage you need will depend on many factors. Simply assigning a multiple to your income could leave you underinsured or even overinsured in some cases. The best way to figure out how much life insurance you need is to use a comprehensive life insurance calculator that allows you to assess how much capital your family will need to meet specific immediate and long term obligations minus any available assets if you die prematurely. An excellent life insurance calculator can be found here at LifeHappens.org.
Myth #2 Employer Sponsored Life Insurance is Enough – It is common for an employer to include group life insurance coverage as part of its benefit package. Employees are usually offered a predetermined amount of coverage such as $50,000 or coverage equal to one times their salary. There are a couple of issues with using an employer sponsored life insurance policy as your main life insurance coverage. One, these policies are usually for smaller face amounts which could leave you underinsured. Two, they are not portable if you change jobs or are laid off. This could leave you uninsured for a period of time. Even if your group policy allows you to buy additional coverage, buying an individual policy will most likely be cheaper especially if you are in good health.
Myth #3 People with Medical Issues Can’t get Covered – It is important to understand that life insurance underwriting has come a long way. In the past, it was extremely difficult, if not impossible, to get life insurance coverage if you had various health issues like diabetes or COPD. Now, many life insurance companies have become more aggressive in underwriting what were once considered serious health impairments. If you need life insurance but have a health issue, it is important to work with an independent agent that can find the life insurance company that will best rate your condition. Click here to see how we get our clients with health issues the best rates.
Myth #4 Stay-at-Home Parents Don’t Need Life Insurance – Insuring a stay-at-home parent is very important. Many couples fail to insure a stay-at-home parent because they are not earning a paycheck in the traditional sense. What they fail to see is that having to replace the services of a stay-at-home parent could cost tens of thousands of dollars per year. With Salary.com’s Salary Wizard, you can calculate the annual value of various tasks and services performed by a stay-at-home parent.
Myth #5 Life Insurance is Too Expensive – This myth stops many people from even looking for life insurance coverage. According to a study done by LIMRA in 2014, over 80% of people surveyed overestimated the cost of life insurance. The fact is that term life insurance rates have never been lower, making life insurance affordable for almost any budget.
Myth #6 Life Insurance Provides No Benefit While You are Living – Many people view life insurance as “death insurance” with the attitude that it only provides a benefit if they pass away. The fact is that cash value life insurance builds tax deferred cash value that can be accessed in the future and some policies even allow you to add riders that can help pay for long term care expenses or provide income if you become disabled. Even some term policies allow you to add riders you can use if you have a chronic or critical illness.
Myth #7 Term Life Insurance is Always the Way to Go – Term life insurance is the best product for most families, but there are situations that call for permanent coverage. For instance, if you think you will have an estate tax liability when you die, you can purchase a policy in an irrevocable life insurance trust (ILIT) that will allow you to leave your heirs a life insurance death benefit outside of your estate that can pay part or all of the estate taxes due. If you have a child with special needs, you can purchase a permanent life insurance policy within a special needs trust that will allow you to leave the funds necessary to take care of your child well after you are gone. If you are a high earner and are maxing out all of your tax deferred options, a cash value life insurance policy designed with the emphasis on building cash value early on can offer a tax deferred savings vehicle that can supplement your retirement income.
Don’t let these common myths about life insurance stop you from getting the coverage you need to protect your loved ones. Our goal is to make the process of shopping for life insurance easier for you. If you need life insurance, don’t go it alone. We are here to answer any questions that you have on life insurance. Work with an independent agency like ours that offers life insurance products from over 40 of the top insurers out there. We work on behalf of you and not the insurance company. Get a free quote today or call us at (888) 687-9444.
About Us
Archstone Insurance Services, LLC is an independent agency that shops over 40 of the top life insurance carriers to provide huge savings on life insurance coverage for our clients. We are happy to answer any questions you might have about any of the insurance products we offer, your planning needs or your existing coverage. Feel free to call us directly at (888) 687-9444 or email us at info@archstoneagency.com.
