Life Insurance Myths Busted: What You Really Need to Know

Life insurance, in general, appears to be one of those issues that most people find difficult or even scary. Furthermore, many relate life insurance directly to older and extremely wealthy people. But facts are that life insurance is one of those financial tools that could be valuable for almost anyone. Unfortunately, several myths related to life insurance may hinder opportunities for people to understand the true potential of this financial tool and how it really works. In this article, we will break down some of the most prominent myths about life insurance and let you know what really matters.

Myth 1: Life Insurance is Only for Older People
The Truth: Life insurance is for everyone, regardless of age.
The most common myth that has been promoted is that life insurance is something you only have to think about as you get older. It’s true that matured people buy life insurance for estate planning purposes or leave their families financially secure in case of their death. However, younger people can also benefit from life insurance. Actually, it is a smart thing to buy life insurance at a younger age. The closer you are to being young and healthy, the more likely you are to get a better rate on your premiums. And the earlier you finalize your policy, the more in time you are going to be protected by a policy for your family in case something bad happens to you.

Why you care: Life insurance protects families in the event that there is something wrong with someone in purchasing that life insurance. It’s not about age, but about preparation.

Myth 2: Life Insurance is Too Costly
The Truth: Life insurance is relatively inexpensive.
Such misconceptions simply because many people think that it would be too expensive are what keep people from really going into life insurance. Life insurance really can be very different in cost, considering all the factors like your age, health, and type of policy you want. For example, simple form term life insurance can be relatively cheap, especially for someone young and healthy. It covers you for a certain number of years, whether 10, 20, or 30 years, and is significantly less expensive than permanent life insurance.

In addition, locating an inexpensive coverage that adequately addresses your requirements can be easily done through a financial advisor or an online comparison tool.

Why it matters: Use life insurance to shield your loved ones against financial threats. They could be left without a caregiver – or so much other valuable work around the house. No cost is too high to avoid this one. Do your homework-you’d be amazed at how affordable it can be.

Myth 3: Stay-at-Home Moms Don’t Need Life Insurance
Reality: Stay-at-home parents provide important services that would be expensive to replace.
Myths like only the bread earner needs to have life insurance are dangerous. Stay-at-home parents provide numerous valuable services that include taking care of children, cooking, cleaning, and other such household responsibilities. If such a parent dies, then it would cost his family heavily to hire someone to play his part.

For stay-at-home parents, life insurance helps pay for these expenses so that, in the event of a loved one’s passing, the family can continue on in their lifestyle as smoothly as possible.

Why it matters: Life insurance isn’t just about replacing income; it’s also about providing financial support for necessary services.

Myth 4: I Have Enough Coverage Through My Employer

The Truth: Chances are, employer-provided life insurance isn’t enough.
For example, many companies provide their workers with life insurance. This is, of course, a pretty attractive benefit for employees. However, it’s always better not to depend exclusively on employer-provided life insurance because usually, the coverage of such policies is only one or two times your annual salary, which in the future might not suffice to maintain your family if you are not there anymore.

You will also lose coverage if you lose your job or are laid off. For this reason, it is a good idea to have your own individual life insurance that you can control and take with you no matter what job you have.

Myth 5: Only the Bread Earner in the Family Needs Life Insurance
Fact: Both partners in a relationship should have life insurance.
Many are of the misunderstanding that only the bread earner in the house needs to have life insurance. This is far from the truth because, even if there is more income from one party versus the other, life insurance is equally important for each partner, whether that person works or not outside the house or earns less. Every householder brings something unique to the household, and when either spouse dies, there can be a financial cost.

For example, take a housekeeper who cooks for the family. Death of such a partner may lead to added burden of childcare or household help. Life insurance policies for both partners are important as these benefits have to be paid in case either of them dies.

Why: It will ensure a lifestyle following one’s spouse’s demise since life insurance maintains a family’s lifestyle with financial stability in the event of a partner’s death.

Myth 6: I Am Single, Have No Dependents, So I Don’t Need Life Insurance
Reality: singles also benefit from having life insurance coverage.
While others may be living with a spouse and children, the single might believe they do not need life insurance. This is not so; many people may find life insurance beneficial even though they do not have a spouse and/or children to leave behind. Think of using life insurance to pay for a funeral expense, outstanding debts, such as a student loan or a mortgage so that loved ones are not burdened with financial responsibilities.

And if you ever plan to have children, starting a life insurance policy while you are young and healthy will save you money in the long run, as younger people generally pay lower premiums.

Myth 7: I will have to pay taxes on the life insurance payout
The Myth: Life insurance payouts are taxable.
One of the very first things that people want to know when they first hear of life insurance is that the payout, or more commonly known as the death benefit, is taxable. That’s not true, and actually the opposite is usually the case. Most life insurance death benefits are paid out to beneficiaries tax-free and not reduced with a large sum of money skimmed off for the government in taxes if the insured dies.

Still, in some other instances-for example, in a taxable estate or when selling a policy to a third party-tax considerations will come into play. Of course, always best to consult a financial advisor or tax expert if concerns arise.

Myth 8: It’s Too Late to Buy Life Insurance If I’m Older or Have Health Problems

Reality: Life insurance can be bought at nearly any age, regardless of health status.
Although life insurance premiums indeed lie relatively cheaper for younger and healthier people, it is not too late to acquire a life insurance policy if you are already older or have some previous health problems. A lot of life insurance companies offer insurance policies targeting seniors or those with health issues. Indeed, such policies cost more; still, they remain helpful.

In other cases, guaranteed issue life insurance or simplified issue life insurance might be used for those who cannot be qualified under standard policies owing to health issues. These usually do not involve a medical exam and can provide the advantage of coverage.

Myth 9: All Life Insurance is the Same
Reality: There are different types of life insurance to meet different needs.
Actually, all life insurance policies are not the same. There are numerous forms of life insurance, and knowing their differences helps you select the best type for your situation. The two major kinds are term life insurance and whole life insurance.

It goes well for a specified period, say 10, 20, or 30 years. This is the cheapest of all the available life insurance options. It pays out a death benefit in the event that a policyholder dies within the term but leaves behind no cash value if the term ends.

While whole life is a type of permanent life insurance, which covers you for your whole life with a savings element called cash value that can accumulate over time, it tends to be more expensive but provides lifetime coverage and can even act as an investment.

Why: Knowing the difference between types of life insurance will help you decide what is best for your financial needs and goals.

Myth 10: Once I Have a Policy, I Don’t Need to Review It
Life Insurance Needs Change and Policies Shouldn’t Remain Static.
For example, people believe that you buy a life insurance policy and that’s that, you’re set for life. Well, we don’t stay the same – we get married, maybe have children; we now have to pay a mortgage on our home, might change jobs, the list goes on and on. And our life insurance needs change along with all of these life changes. So do review this policy every few years to make sure it still matches your goals.

You may want to add to your coverage when you increase your family size, or take on more financially-related responsibilities. You might find you don’t need as much coverage since you pay off debt, or children become financially independent.

Why: Life insurance is one of the most critical components of any personal financial plan. An annual review ensures that coverage is adequate to meet new circumstances occurring in your life and continues to be an ongoing source of protection for your loved ones.

Conclusion
Life insurance is indeed one of the great parts of financial planning, yet also widely misunderstood. By the unveiling of these life insurance myths we see that life insurance is affordable, flexible, and accessible to all people regardless of age or their stage in life. Whether you’re young or old, single or married, rich or poor, there is likely a life insurance policy that best suits individual needs and provides valuable protection for one’s loved ones.