The words life and insurance are two of the most intimidating and avoided words when it comes to budgeting and the realm of personal finance. We have all heard the horror stories that are out there: dealt with issues of failed coverage, or paid the exasperating premiums that can come with life insurance policies. However a lot of what we hear and read needs to be taken with a grain of salt. Many stories are overblown, many pieces of advice are simply false, and the fact is that buying life insurance doesn’t have to be, pardon the pun, the death of you.
To help you weed through the plethora of information and get you straight to the facts, here are some of the top life insurance myths you may encounter along your way.
Life Insurance Myth #1
I’m Paying Premiums so I Should Always Use My Coverage
The main principle behind life insurance is to protect you and your dependents in case of a major disaster or accident. The rule of thumb here is that you should only use your coverage if you cannot afford to pay for the damage or loss on your own. If you continue to make claims, your premiums will start to skyrocket.
Life Insurance Myth #2
Everyone Needs Life Insurance
If you are alive and well, it does not necessarily mean that you need life insurance. If you have no one depending on you and your income, then life insurance is often not a necessity. This is especially true for children, young adults, and retirees. Without any dependents, life insurance can still be beneficial at times but only in rare and unique instances.
Life Insurance Myth #3
Only the Family Member that Works Needs Life Insurance
For anyone who thinks that only people who go to work every day and bring home a paycheck need life insurance, just one look at the rising cost of childcare will show you otherwise. Stay-at-home spouses contribute significantly to a household and just imagine the money it would require to cover the additional costs of transportation, housekeeping, accounting, food prep, and so on, should something tragic happen.
Non-working spouses can contribute just as much as someone working full time and that is why life insurance is necessary for all contributing members of the home.
Life Insurance Myth #4
Universal and Whole Life Insurance is Always Best
A lot of people feel that these two life insurance choices are always the best because they offer a chance to get money back in the long term. However, the truth is that term life insurance is often the best overall choice.
It offers a far smaller premium that allows you to invest your savings in a much more beneficial and prosperous manner.
Life Insurance Myth #5
Social Security Covers Everything so Disability Insurance is Unnecessary
There are many instances where you could become disabled in which social security will not cover you. Even in cases where you are covered, it could take months or even years to start to receive the benefits that you need. Add onto that the fact that your disability needs to be long term in order to qualify, and you can see why disability insurance is so important if you want to be fully protected.
Life Insurance Myth #6
Only High-Income Citizens Need Umbrella Coverage
In contrast to what many people believe, umbrella insurance is not just for rich people. Lawsuits have become incredibly common over the years and this umbrella coverage has become a necessity for anyone who owns a business, boat, house, or a car.
By opting for umbrella insurance, it can add anywhere from $1 to $5 million in additional liability coverage in the event that you seriously injure someone and are taken to court.
Life Insurance Myth #7
Not Buying Health Insurance is a Personal Choice
The truth is that people who opt to avoid buying life insurance adversely affect every other citizen in the country. The increasing amount of people who do not have life insurance coverage affects the price of all kinds of good and services throughout the country. The more people relying on social security and Medicare, the higher taxes are and the more money comes out of everyone else’s pockets.
On top of that, when employees opt out of life insurance it lets employers know that health insurance benefits may not be as important to workers as they really are.