There’s a lot of misinformation surrounding life insurance. We want to set the record straight.
Let Harry Levine Insurance debunk 10 common life insurance myths so you can make an educated decision about your insurance needs.
Nobody likes to think about their own mortality, which is probably why no one likes to think about life insurance.
Which is unfortunate, because life insurance is one of the most useful policies you can buy.
Think about it: you hope you never have to file a claim on your home or auto insurance, but there will come a time when that life insurance policy pays out. Doesn’t it make sense to understand life insurance a little bit more?
Many of our clients come to us with a lot of inaccurate beliefs about life insurance. So we’ve collected (and debunked!) 10 common life insurance myths, so that we can reverse the tide of misinformation and help educate you about your insurance needs.
Myth#1: Life insurance is expensive.
If you’re one of the people avoiding life insurance because you think you can’t afford it, think again!
Life insurance rates are probably a lot lower than you expect. A 20-year, $500,000 term policy for a healthy, 40-year-old female may only cost around $300/year (or $25 a month). There are many different factors that determine your life insurance rates (smokers, seniors, and those with medical conditions would pay more, for instance), but for most people, their peace of mind is well worth the cost.
Truth: Life insurance premiums are probably a lot lower than you thought. Get a quote from an independent insurance agent to find out for sure.
Myth#2: Life insurance is a waste of money if you’re young and healthy.
If old age were the only thing that could kill you, this might be true. But sadly, there are a number of things that can cause you to pass away unexpectedly.
You could contract a severe acute illness or get hit by a bus. You could be involved in a fatal car accident or fall off the roof while cleaning the gutters.
Our point isn’t to get morbid and make you contemplate your own mortality. But it would be dangerous to assume that because you’re young and healthy now, you’re going to stay that way forever. Thinking like that is what makes this one of the most dangerous life insurance myths out there.
Rather than thinking about how you feel, think about your loved ones instead. Would they experience any financial suffering due to your absence? If so, you need to seriously consider purchasing a life insurance policy.
Truth: Accidents happen all the time; life insurance helps provide for those you leave behind.
Myth#3: I don’t have a spouse or dependents, so I don’t need life insurance.
As Benjamin Franklin once famously said, “In this world, nothing can be said to be certain, except death and taxes.” And it’s absolutely true. Death is not only inevitable, it doesn’t absolve you of needing to pay your taxes!
If you’re single, your executor or surviving family (siblings, parents, nieces, nephews, etc.) will be responsible for paying any outstanding debt you may have left behind. What happens if you don’t have enough set aside to cover it all?
At the very least, you should have enough to cover the cost of your funeral expenses, but life insurance can also be an easy way to leave an inheritance to your surviving friends, family, or a worthy cause.
Truth: Life insurance can help pay for outstanding bills and funeral expenses, so your surviving friends and family don’t have to.
Myth#4: I don’t need life insurance if I’m a stay-at-home parent.
Think about everything you contribute to the household: cleaning, childcare, cooking, groceries…who’s going to take over if something happens to you?
If your family lives off a single income, you probably don’t have extra wads of cash set aside to hire additional help (cleaning crew, nanny, etc.), which means your spouse will have to coordinate all of that in addition to their regular job…and under the emotional stress of losing you.
Truth: Just because you don’t bring home a paycheck doesn’t mean you don’t contribute to the household. Life insurance will ensure that your family doesn’t have to pick up the slack during an already difficult time.
Myth#5: You can’t buy life insurance if you have a pre-existing condition.
More serious health conditions may prevent you from qualifying for life insurance coverage, but it’s still possible to get a life insurance policy if you have a minor, well-managed condition, such as diabetes or high cholesterol.
However, expect to pay slightly higher rates.
In fact, this is usually the perfect time to purchase life insurance, as you may not qualify if your condition worsens later on. Having a policy in place before you need it is the best way to get great, affordable coverage.
Truth: Health conditions are not necessarily a deal breaker, you just might pay a little more in premiums.
Myth#6: I already have enough life insurance coverage through my employer.
If you don’t have any dependents, it might be. But typical payouts are only about twice your annual salary, which is probably not enough if you have a family to support.
Many employers give you the option of purchasing supplemental coverage but this doesn’t correct the other big drawback: your coverage doesn’t follow you. If you were to leave your job, you would lose your life insurance coverage as well.
Truth: Employer-paid life insurance typically only pays twice your annual salary and is tied to your job. Privately paid insurance is yours no matter what career you go with.
Myth#7: If I pass away, my dependents will lose most of the insurance money to taxes.
This is one of those life insurance myths that persists, even though information is readily available.
According to the IRS, life insurance payouts are not subject to taxes and you don’t have to report them. However, any interest you receive on them is taxable.
Truth: Life insurance proceeds are not taxable.
Myth#8: I’m not old enough for life insurance.
Not only is life insurance available at any age (even for children), premiums usually get more expensive the longer you wait to purchase it. The same 20-year, $500,000 policy that cost $300/year when you were 40 could be nearly triple that by the time you reach 50.
There is no one too young or too old for life insurance. Life insurance exists to lessen the financial impact of a loved one’s death. If surviving friends and family members would be left to pay anything (including funeral expenses, outstanding bills, mortgages, etc.) after you pass away, it’s worth having life insurance, no matter how young you are.
Truth: Life insurance is available—and useful—at any age.
Myth#9: Term life insurance is better than whole life insurance.
Term life insurance has an “expiration date” (usually 5, 10, 15, or 20 years) while a whole, or permanent, life insurance policy is valid for your entire life.
Choosing between the two is a much deeper subject than we can cover here, but each policy has its own set of benefits. For example, although term life insurance is generally more affordable, whole life insurance will pay death benefits plus a cash value accumulation that builds up throughout the life of your policy.
Discuss your options with a local independent insurance agent to find the right policy for you.
Truth: There are pros and cons to both term and whole life insurance.
Myth#10: You can find the best deals on life insurance online.
Buying a life insurance policy isn’t like shopping on Amazon. In fact, your individual life insurance policy is probably going to be the same price no matter where you buy it from.
However, there’s one major benefit to buying from a human: customer service.
Insurance agents know a lot more about available policies than you do, so they’ll know what types of coverage best fits your needs. So if you have an aging parent that requires special care or a pre-existing health condition, they’ll be able to give you enough information to make an educated decision about your insurance needs.
Truth: You won’t pay any more buying life insurance in-person, and you’ll get a much better level of customer service.
When you purchase home, auto, or business insurance, it’s with the hope that you never have to use it. But when it comes to life insurance, cashing in on that policy is inevitable.
No one lives forever, and life insurance is an affordable investment in the loved ones you will leave behind.
These 10 common life insurance myths aren’t just inaccurate, they’re harmful, especially if they cause people to go without adequate coverage.
At Harry Levine Insurance, we want all of our clients to feel confident enough to make informed decisions about their insurance. We have a wealth of information regarding a multitude of different carriers and policies and we look forward to guiding you toward the right policies for you.