Finding and purchasing the right life insurance is a big job, and finding a career and coverage that suits your needs can be a challenge. Furthermore, there are many myths about life insurance, and it takes some work to keep the myths and facts of life insurance straight. In this guide, Bankrate insurance experts will take a closer look at some of the most common life insurance myths and explain why they are not true.
Myth 1: I’m not old enough to buy life insurance
It is easy to assume that life insurance is the best way to protect older, established individuals with families and protect their financial reserves to pay premiums. However, the reality is that the younger you are, the more likely you are to find cheap life insurance.
Your age is one of the main factors that insurance companies use to determine what you pay. They assume that the younger (and healthy) people you are, the less likely they are to have to pay on the claim, and as a result, they will have less claims against you for your compensation.
This is especially true for term life insurance. This is the most affordable type of insurance policy, as it pays death benefits only if you die during the policy term of office. It could also be less than you would pay for a permanent type of insurance when you are young, for life. If you buy cheap life insurance when you’re young and are able to manage potentially high costs, you’ll often be able to convert it into more substantial permanent coverage.
In fact, older people can have difficulty finding coverage, especially when there are existing health challenges. In that case, it could be placed in a high-risk category, resulting in higher costs and even denial of compensation.
Myth 2: Life insurance is expensive
Life insurance premiums are highly personalized based on multiple factors, including age, health, gender, and more, making it difficult to generalize about costs. Usually people assume it costs more than that.
For example, in Limra’s 2024 Insurance Barometer Survey, more than half of those voted overestimated the costs of a 20-year term policy for age 30. Most respondents thought that such a policy would cost over $500 a year. In fact, the premium comes at around $200 a year.
Considering the many factors involved, your best strategy is to get quotes from several insurance companies to get a sense of the range of prices offered. You may be happy to be surprised by what you find.
Myth 3: Home parents don’t need life insurance
It is a myth to think that life insurance is not needed for people who don’t generate income. As many home parents know, the value of services they offer to their families, including childcare, transportation, tutoring, and satisfying cooking. This allows life insurance to provide valuable coverage to protect the remaining partners in the event of death.
If your home spouse dies, you may need to hire a childcare professional or someone else to replace the service. Furthermore, the rest of the parent’s burden may be struggling to maintain the family in a way they are used to. With the financial support provided by death benefits, this can make a huge difference in the quality of life for families.
Myth 4: My group life insurance is enough
Many people have life insurance as part of their workplace benefits. However, unlike your health or dental insurance, group life insurance by your employer is not always sufficient for the needs of your family. Additionally, if you quit your job or get fired, you may lose your group life insurance coverage.
Most employers have group life insurance based on your salary. Your group life insurance may not be sufficient based on how much financial support your family needs. If you have Group Life Insurance, we recommend that you make up for it with a personal policy that follows you even if you change jobs.
Myth 5: If you have personal savings, you don’t need life insurance
Saving money is a big financial habit, but even if you have a large emergency fund, you can still benefit from life insurance. Generally speaking, if you die unexpectedly, it may not be wise to rely entirely on savings to support your family.
Even the biggest savings accounts can be discharged when major changes occur in life. For example, if you are in a medical emergency, a chunk of money in your savings account might go towards your hospital bill, leaving your account much smaller than before. In the case of your death, your family may not have enough savings to save, so that your family will maintain their current lifestyle.
Life insurance can provide a large safety net at reasonable costs. Death benefits are usually paid tax-free to the beneficiaries and allow them to spend the money they wish.
Myth 6: You cannot get life insurance if you have an existing condition
Many individuals worry about health checks, a common requirement when applying for life insurance. They may assume that pre-existing conditions or genetic predispositions to diseases such as heart disease or cancer may lead to them not insured. Your health plays a role in determining your premium, but it’s a myth to think you can’t get coverage just because your health is not perfect.
Insurers often assign potential policyholders to substandard categories from priority plus. Applicants in existing conditions may be placed in the lower tier. However, other factors are important too. If your condition is well controlled and you are in the care of a doctor, you may win a higher ranking. Your lifestyle also plays a role. For example, if you are a non-smoker, you may get a more favorable ranking.
If you have serious health concerns, we recommend considering no-health coverage, such as guaranteed issuance insurance. However, don’t assume that other types of policies are out of reach, such as terminology, whole or universal life. There is no cost to answer your questions and consult with an independent, licensed insurance agent who can help you find the right insurance for your needs regardless of your health.
