Life insurance confuses most people. There is an astonishing number of myths regarding life insurance, how much you need and who needs it. The vast majority of people prefer to stay away from an overly aggressive insurance agent, so these myths persist.
Myth One - If I am breathing, I need life insurance.
Life insurance is constructed to provide for your dependents after you die. If you do not have any dependents, life insurance is probably unnecessary. A small policy to take care of final arrangements may be advantageous, if your estate will not be large enough to cover those expenses.
Myth Two - I work and my spouse stays home to care for our children, so only I need a life insurance policy.
This is an enormous fallacy concerning life insurance and who needs it. If the stay at home spouse were to die, your children would need to be placed in daycare. Have you priced childcare recently? As a caregiver of the children and keeper of the home, a parent who does not work outside of the home contributes a great deal to the family income. If this parent were to die, how would you pay for housekeeping and childcare? A life insurance policy on every adult in the home is vital. After the death of a spouse, life insurance will help pay for any new and unexpected expenses.
Myth Three - I should buy a whole or universal life insurance policy, so I can get a return of my premiums.
This is another misnomer. Term life insurance is typically the ideal choice for the vast majority of people. A term policy has a set time frame of usually 10 to 30 years with significantly lower premiums than a whole or universal policy.
Myth Four - Only people with children need to have a life insurance policy.
In actuality, if your spouse depends on your salary to help pay the bills, you need life insurance. If your partner would be unable to manage the mortgage or bills alone, a life insurance policy will be hugely beneficial to them.
Myth Five - I have life insurance through work, so I do not need additional coverage.
Many employers supply a life insurance policy as part of their benefit package. But what happens if you leave your job? If you leave the company, you may find it difficult to obtain an affordable policy due to illness or age.
Myth Six - I cannot possibly afford life insurance.
Life insurance typically costs significantly less than you think it does. For example, a healthy 35 year old man is able to purchase a term life insurance policy for around $15 a month.
Myth Seven - All life insurance policies are identical.
This fallacy is often the reason most people are not sufficiently covered by life insurance. The belief behind this myth is the preponderance of policies have similar names, yet the coverage is significantly different. You need to do your research and read all of the fine print, before you purchase a policy.
Myth Eight - You must have life insurance to pay off all of your debts.
This is not entirely accurate. Any inheritance you leave behind will be reduced by the amount of debts you owe. Any monies owed over the amount of your estate die with you, unless the debts are jointly held.