There is a lot of confusion that arises when people think about and discuss life insurance. This confusion is partly due to most individuals adopting opinions from family members and friends who do not fully understand how life insurance works, the process for obtaining a policy, all the benefits it provides, and how eligibility and rates can change as you get older and develop common health conditions or even health complications. Another reason for confusion is that it’s not a fun subject to talk or think about. Since no one wants to contemplate their own death, most people don’t take the time to do their research. Instead, they put it off or don’t bother at all, leaving their families in a tough situation that could have been easily avoided.
So, today, we’re going to address some of the common misconceptions regarding life insurance so that you can make the best decision possible for setting up coverage to protect your family and loved ones.
Here are several misconceptions and the reality behind them:
Misconception: “I’m too young to worry about buying life insurance”
Reality: There is a good reason to purchase life insurance in your 20s or early 30s. Life insurance premiums are less expensive when you’re young and increase as you continue to age, going through life’s stages like getting married, buying a home, and having children. When you’re young, you may prioritize paying other bills and spending any disposable income on things you enjoy. However, your future self will be thankful and relieved that you purchased a policy when you were young, as opposed to waiting until it becomes an absolute necessity when you’re older and rates are much higher.
Misconception: “People only need life insurance if they have a spouse or have children”
Reality: Typically, life insurance is purchased to protect your family by making up for the loss of income and financial provisions from you in the event of your death. The family members that this would usually apply to are your spouse and children. You want to make sure that they can make ends meet and hopefully live a full life that they can enjoy if you are no longer there. However, there are other scenarios to think about that could affect other family members, even if you don’t have a spouse and children, such as paying for funeral expenses or legal concerns. You don’t want to leave other family members to bear the burden of these costs. They will already be struggling to cope with your passing, and life insurance can help ease the already disheartening circumstance by preventing them from having to worry about being able to afford your funeral and final expenses.
Other scenarios could include financing a home that a relative lives in or being financially responsible for that relative. You also may need to provide funds to pay for a caregiver for that family member if they are of old age and not in good health. Additionally, you might be looking to get married and start a family in the future, and it’s in your best interest to obtain a policy to lock in affordable rates while you are young and healthy. Therefore, it is important to evaluate both your current need for life insurance as well as your possible future need as soon as you can. Purchasing a policy only becomes more expensive and more difficult to obtain as you age and develop more health conditions.
Misconception: “Life insurance is extremely expensive”
Reality: Most Americans believe life insurance costs nearly three times the actual price, according to recent surveys. When asked, they estimated a healthy 30-year-old would pay $400 annually for a 20-year, $250,000 level term life insurance policy when, in fact, it would cost roughly $150 per year. Millennials and Gen Xers are common culprits of overestimating the cost of life insurance, on average by 213% and 119%, respectively.
Not only is life insurance more affordable than most people believe, but premiums are also based on many things that you have some control over, such as credit history, fitness, diet, lifestyle, and hobbies.
Misconception: “I don’t need life insurance. I can save or invest my money”
Reality: Life insurance is a risk management tool that protects your family’s financial well-being in the event of your unexpected death. Savings and investments allow you to strategically plan for a future that you want and expect to reach. Investing the monthly premium that you would pay towards your life insurance policy would be better than doing nothing, but people tend not to save as much as they think they will. It’s tempting to dip into your savings accounts for emergencies or when money is tight.
Also, keep in mind that when you first start saving and investing, your accounts won’t match what your life insurance policy’s death benefit will be on day 1. Depending on the type of policy and the amount of coverage, it could take decades and unrealistic returns on your investments to increase your savings to anywhere close to what the death benefit from your life insurance would be. This is assuming you stay disciplined and consistent with contributions to your savings and investments.
Not to mention, your savings and investments will be taxed upon your death and possibly go to probate court, while your insurance policy’s death benefit is paid directly, tax-free, and quickly to your beneficiary. So, unless you have the exact amount of funds in your savings account or investments that will be large enough, after taxes, to provide what a policy’s death benefit would pay, you should not forgo getting life insurance.
Misconception: “I’m a stay-at-home parent so I don’t need life insurance”
Reality: Being a single parent is a tough job, but it’s even harder when you work full-time. If the homemaker were to die, there would be dozens of tasks around the home that the primary wage earner would not have time for. These include cleaning the house, doing laundry, preparing, and cooking food, grocery shopping, pet care, babysitting, and bathing children. So, life insurance for a homemaker isn’t just about covering the costs for final expenses but also the expenses that will now arise for childcare and other tasks that would have normally done by the homemaker. It’s currently estimated that it would take more than $143,000 a year and 92 hours a week to replace the top ten tasks of the average stay-at-home parent. Life insurance for the ‘breadwinner’ and homemaker is just as important as each other and should be purchased to fully protect your family in the event of either passing away.
Misconception: “I don’t need life insurance because I already have it through my employer”
Reality: If you currently have group life insurance through work, you are off to a great start. But don’t stop there. Group life policies have a death benefit that is usually fixed at an amount that only equals somewhere between one and three times your annual salary. This amount of coverage will help your family cover immediate living expenses in the event of your death but will be nowhere near what they will need to survive and thrive without you there to provide.
Unfortunately, most people haven’t taken the time to think about all the expenses their family will have and the amount of life insurance they need. To put things in perspective, a life insurance policy through your employer is usually not enough to pay off a mortgage or provide an education for your children. And in most cases, you will lose your coverage if you lose your job or leave voluntarily. So, it’s best to evaluate your needs and make sure you have an individual policy that will provide the right amount of coverage for your family and will stay active even when there are gaps in employment.
Misconception: “People with health problems can’t get life insurance”
Reality: Today, many life insurance providers have products designed specifically for individuals with below-average to poor health. Your coverage will probably cost more, and the process to obtain it could take longer, depending on the type of insurance, but it’s not impossible for these individuals to get coverage.
Now that we have discussed some of the most common misconceptions regarding life insurance, we hope that you can now base your decisions on facts rather than false realities. Here at Angel Wings, one of our licensed insurance specialists can discuss your specific situation, help explain the various options, and make recommendations that are right for you and your family.
Here are ways you can reach us:
Phone: 866-353-9228
Email: info@angelwingslife.com
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