Top 7 Life Insurance Myths

Choosing a type of life insurance can be a difficult task, because policies have many elements that must be considered carefully before making a decision. These are the top 7 life insurance myths and the realities they alter:

 

1. Only breadwinners need coverage

This is one of the most popular life insurance myths. Many people don’t think about the costs of childcare, housekeeping, school transportation and food preparation. A non-working partner actually contributes to the household budget even more than a breadwinner. The costs of replacing a deceased homemaker are higher than you would expect, and that is why coverage is essential.

2. Single people don’t need insurance

Many single people believe that they don’t need coverage because they don’t have any dependents. Basic life insurance is essential because it can cover final expenses, personal debt and medical bills that wold otherwise be supported by family members. A life insurance is also a great way to leave a legacy, by donating the money to charity.

3. Investing is better than insuring

Depending only on investments is a huge risk, especially if you have dependents. While investing can bring profit, live coverage is necessary for the security of your assets and loves ones. The total premium for a more expensive permanent insurance can cost less than ongoing premiums of an affordable term policy.

4. Term life insurance is enough

Each person has different needs and responsibilities. Term or employer-paid coverage can be enough for a single individual without dependents. Whole life insurance might be necessary if other family members rely on your salary or if you will need to cover future estate taxes.

5. The cost of the premium is deductible

The cost of personal life insurance is deductible only if the policyholder is self-employed and the coverage is used for asset protection.

6. The coverage needs to be only twice my annual salary

In order to determine the real amount that your insurance has to provide, conduct a cash flow analysis. Besides medical bills and final expenses, you might have to provide for your family for a few years or pay off debt.

7. Universal and whole life insurance are the best options

This is one of the most common life insurance myths. Many people believe that they need a universal or whole life insurance because they can get their money back. The truth is that a term policy has lower life insurance quotes, and you can use the difference to invest into a retirement account.