Life insurance can feel like a mystery. There are countless opinions about how to plan, what the right limits are, and what type of coverage to buy.
Since there are so many different thoughts on the subject, there are also many myths and misconceptions. So, we at Quotes Parade thought it would be fun to explore some of the common myths we are often called upon to debunk.
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I Do Not Need Life Insurance Because I Am Single
While you may not have a family that does not mean others will not be affected by your death. Your loved ones will still need to address your final expenses, clear your credit card debt, pay for your student loans, and sell your home (or address the mortgage payments). Life Insurance will provide for all of these.
My Salary Determines My Life Insurance Need
Despite the common misconception that having 2x, 5x, or 10x your salary is the right “formula” the truth is that the conversation is not this simple. Knowing how much income needs to be replaced, how much debt will be left behind, and who needs to benefit from life insurance proceeds is the most basic way to approach planning. Then you need to factor in additional funds you would like to leave, the type of policy, and your free cash flow.
My Employer Provided Life Insurance Is Adequate
Employer paid life insurance is a great perk. However, it is generally limited in coverage amount and is only available while employed at that specific company.
My Employer Provided Life Insurance Will Follow Me When I Leave My Job
Some benefits programs may offer a conversion option but it is typically expensive. With most employers having a waiting period before a new employee is eligible for benefits, having your own policy assures that you have no gap in coverage should you change jobs.
As The Head Of The Household I Am The Only One Who Needs Life Insurance
While your income would certainly need to be replaced if you are the breadwinner, imagine the situation in reverse if you are left maintaining the home, taking care of the kids, or even just needing to backfill a little extra income for vacation. We recommend that both partners in a relationship have coverage. Furthermore, purchasing coverage for children at birth can be a great way to obtain them an inexpensive and comprehensive policy.
My Life Insurance Premiums Are Tax Deductible
In certain strategies for advanced estate planning or corporate owned policies, there may be a tax advantage. Rarely can you just “write off” your insurance premiums. We file this one under “busted”.
It Is Better To Invest My Money Than Buy Life Insurance
Certainly investments in the stock market or in a business have the potential for higher gains but they also have risk of loss. Permanent life insurance is more like “old faithful”. It is conservative but a good compliment to a financial plan. Some indexed variable policies are able to keep pace with the markets while limiting loss. If you have questions about life insurance as an asset class, please give us a call.
Term Life Insurance Is Always Sufficient / Permanent Life Insurance Is A Scam (and vice-versa)
The fact is that both types of life insurance are useful and your specific needs will dictate which is better. Term insurance is very attractive when you are young, strapped for cash, and in need of protection so your partner is not left bearing your student loan debt and handling the mortgage. However, later in life permanent coverage becomes an attractive option as you never “lose” your money. Of course, health status, age, and a variety of other factors bend the rules here. You should speak to a licensed advisor to help determine which option is right for you.
Buying A Return Of Premium Rider Assures I “Beat The House”
A return of premium rider, typically found in long-term care coverage, will return your entire premium should you never utilize the policy. While there can be value here, you are not “getting one over on the insurance company”.
Variable Life Insurance Will Always Outperform Straight Life Insurance
Variable coverage is a permanent policy which fluctuates based on current market rates while traditional “straight life” has a specific interest rate. While variable has the potential to outperform, it can also underperform. For this reason, we believe that either policy can be the correct policy for the right person. Give us a call to discuss the nuances between these coverages and figure out if either one is the right solution for you.
I Must Buy Life Insurance
Everyone can benefit from life insurance but not everyone will buy life insurance. Our opinion is that everyone should have some type of life insurance but it is not a necessity. So, if you are interested in tax free income and added peace of mind, give us a call.
I Cannot Afford Life Insurance
While age and health play a large factor in pricing and coverage availability, there is generally an affordable solution out there for everyone. Having a thorough understanding of you and your life will help assure we can negotiate this policy.
I Am A Stay-at-home Parent with No Income So I Do Not Need Life Insurance Coverage
In situations like these, we often argue that this parent would have a greater need for life insurance than the breadwinner. This is because a loss of life would generate additional expenses which might not be absorbed with the current household income. In addition, a policy on this parent could be directed to fund education for the children, taking this burden from the shoulders of the surviving partner.
Once I Buy A Term Policy I Cannot Convert It To Whole Or Permanent Life Insurance
Many term policies have a conversion period and/or the insurer will offer you the option to be underwritten for a permanent policy. We recommend that, when placing term coverage, you consider the interval at when you will next need to apply for a second term OR when you believe you will want to convert to permanent coverage. Planning a strategy around this timing will make it a smooth transition and you can elect to modify your life insurance strategy on yours terms.
Life Insurance Is Expensive
Of course it can be expensive; particularly if you have poor health, are later in life, or would like very high limits. However, with a thorough understanding of your situation, we can likely negotiate an inexpensive policy to meet some of your planning objectives.
I Cannot Obtain Life Insurance Due To A Health Condition
At Quotes Parade, we specialize in high-risk life insurance. Helping clients with medical conditions navigate the insurance climate can prove challenging but we are frequently successful in obtaining coverage for almost any medical condition.
I Am Too Young And Do Not Need To Worry About Life Insurance
Quite the opposite is true. In your younger days, income is smaller and it would be a major setback to your partner if your income was lost. In addition, young people often qualify for the best available rate as they are generally healthy. Locking in a permanent or extended term life insurance policy is a great, affordable, idea.
My Life Insurance Only Benefits Me After My Death
In recent years, accelerated benefits riders have become popular. These riders allow you to trigger settlements from a policy in the event you require significant medical care. To find out if this type of enhancement is right for you, give us a call.