Many people have misunderstandings about life insurance, and unfortunately, those wrong ideas can spread like wildfire. As a result, families often go without much-needed financial protection. Purchasing life insurance should be a part of everyone’s financial plan, and as a way to protect your family in the event of your death. Read on as we debunk some of the most common myths surrounding life insurance.
Too Many Choices
When it comes to choosing life insurance options, many people feel there is an overwhelming selection, making it too challenging to find a good solution. Thankfully, life insurance falls under two general categories: term and whole life policies.
There are a few key differences between the two options. Term life insurance is coverage for a set amount of time, and the policies have no cash value. These policies protect your family in the event you die prematurely. They can typically be renewed when they end, although renewal is usually quite costly. Whole life policies are permanent and stay with you until death. They tend to be more expensive than term life policies, and they also have a cash value.
Applying is a Pain
It’s true that a blood test is required for most people when applying for life insurance. However, there is no need to be hesitant about giving a blood sample; in fact, it can be a painless process, and you can arrange to have it done wherever it is most convenient for you, whether it’s at home or your workplace. The purpose of the blood test is to assess your overall health by checking your blood pressure, BMI, cholesterol levels, and whether tobacco, nicotine, drugs, or major illnesses are present. If all results are normal and good, then you’ll most likely qualify for lower life insurance premiums.
Workplace Coverage Is Sufficient
Employers frequently offer minimal life insurance to their permanent staff at little or no cost to the employees, along with an option to purchase additional insurance. However, as Investopedia explains, the coverage from these policies is usually quite low. Typically limited to one or two years’ worth of earnings, the end result would mean your family members would still face a substantial financial burden. Bear in mind, the overall costs of a basic funeral alone can run about $11,000. Do some calculations to sort out how much coverage you really need.
Also, if you rely on your employer for life insurance and you leave your position for a new job, the workplace closes, or you otherwise lose your job, that insurance policy ends with the transition. There is often a gap in coverage until you have insurance at a new workplace, if it’s available at all. What’s more, you can often purchase better policies for the same amount of money on your own. In other words, it’s worth the investment in all regards.
We’ll Lean on Savings
You might be thinking that your family members can lean on your emergency savings to handle lingering expenses following your death. An emergency fund is a crucial aspect of sound financial planning, but it’s meant to be a safety net for short-term situations, such as a job loss, car repairs, or medical expenses, among other things.
However, your cash reserves can go pretty quickly just replacing your income, and if your surviving loved ones need to tackle an everyday emergency situation, things will be that much more difficult for them.
While emergency savings won’t replace life insurance, it’s still important. Yet, some research indicates that most people don’t have savings established. Be sure to calculate whether you have enough money in emergency savings to help your loved ones with day-to-day troubles.
Choosing Is Too Hard
Discerning what insurance options are best for your circumstances can be tough. Everyone has unique needs, and different policies and amounts suit different situations best. It’s best to work with a reliable insurance company that can address your needs and design a comprehensive plan that suits you best.
Once you settle on a policy and put something in place, make sure to put that information, as well as any other legal documents—like a will or power of attorney—in a safe place all together so loved ones don’t need to go hunting.
As you can probably tell, there are many myths surrounding life insurance. Having a plan in place is the best way to provide for your family should the unthinkable happen. Be sure to sort things out so you can protect your loved ones.