Life Insurance Myths

Myth #1 - Only breadwinners need life insurance coverage

Unfortunately, when it comes to life insurance, coverage for non-working spouses is often overlooked. Although your stay-at-home spouse may not earn an income, think of the services he or she probably provides for free: child care, meal preparation, housekeeping and more. With that spouse gone, life suddenly gets a lot more expensive. It is estimated a non-working spouse contributes at least, but usually more, the equivalent of a full time job. Life insurance can defray the cost of hiring help in your partner's absence.

Myth #2 - If you have poor health, you can't get life insurance

Some people in poor health mistakenly believe that they can't get life insurance. Those with diabetes or some other chronic condition worry that they will be considered ineligible for life insurance. The good news is that this isn't always the case. Many people with health problems can purchase life insurance coverage. However, poor health usually does come with a cost for life insurance. Premiums paid by those with poor health are likely to be higher than those paid by someone in good health.

Life insurance companies are about assessing risk. If you are in poor health, or if you have a chronic condition, you represent a higher risk of dying before the life insurance company has a chance to collect enough premiums to offset paying the death benefit. In order to help limit some of that risk, you will have to pay higher premiums. But life insurance is too important to neglect for this reason. You can get your insurance from a company that specializes in these types of policies, and pay a little bit more, but your life can still be insured.

Myth #3 - My term life insurance coverage at work is sufficient

Maybe, maybe not. For a single person of modest means, employer-paid or provided term coverage may well be enough. But if you have a spouse or other dependents, or know that you will need coverage upon your death to pay estate taxes or create an estate for charity, then additional coverage may be necessary.

Life insurance policies through work are generally only in force while you are employed with that company.  So, if you leave the company or retire, you may be without coverage. Therefore, a personal life policy assures adequate coverage regardless of your employment and may provide coverage after retirement when you are older.

Myth #4 - I only need an amount of life insurance coverage equal to twice the amount of my annual salary

In general, you need an amount of life insurance to cover your family’s financial needs.  The amount is based on 1. how much is needed at the time of death to meet immediate obligations (such as funeral costs and outstanding debt) and 2. how much future income is needed to sustain the household (such as mortgage and educational funding). A cash flow analysis is usually necessary in order to determine the true amount of insurance that must be purchased.  The days of computing life insurance coverage based only on one's income-earning ability are long gone. Here’s a life insurance needs calculator from LifeHappens.org that can help you determine the amount you need based on your unique situation.

Myth #5 - Only people with dependents need life insurance

Even single persons need at least enough life insurance to cover the costs of personal debts, medical and funeral bills. If you are uninsured, you may leave a legacy of unpaid expenses for your family or executor to deal with.

Even a small life insurance policy would cover these costs. Moreover, buying while you're young can help you lock in lower rates and guarantee coverage if you develop health problems later in life.

If you have questions about any of these life insurance myths, call us today at 800-922-8381 to get the facts straight!