It’s easy to feel overwhelmed with life insurance, as there are so many types with varying costs and benefits. You may be wondering—where do I start?
First, life insurance is important because it provides comfort and security for the people you care about. In this article, we’ll break down the common myths about life insurance to help get you on the right path.
Myth #1: My employer offers group life insurance, so that’s all I need.
While group life insurance can be a nice benefit from your employer, it’s often not enough coverage to protect your family in the event of your death. Further, group coverage may only last as long as you are employed with that company, and job security is not always certain.
While many group plans will give you the option to convert your group life insurance to personal insurance if you leave the company, a career transition is rarely a good time to be adding expenses to your personal or family budget. Also, as you age, purchasing new personal life insurance policies becomes more expensive.
You can talk to an insurance advisor to see how your group and personal insurance policies can work together so that your family is fully protected for any future situation.
Myth #2: I have more than enough coverage.
Many people underestimate how much money is truly needed to provide their family with financial security in the event of their death. Sometimes simple benchmarks are used, like multiplying your income by ten, to decide how much coverage your family would need, but these can be inaccurate.
Everyone’s situation and needs are unique. Read more about how to calculate how much life insurance you may need.
Myth #3: Buy term insurance, it’s the least expensive coverage.
Buying term insurance can be appealing, particularly for younger people as the premiums are relatively low. But just as the name suggests, term insurance provides coverage for a defined period of time.
Term insurance is often a preferred choice for parents who are looking for the peace of mind of supporting their children financially for five, ten or twenty years, covering the time their children are still dependent.
Term insurance does offer several benefits, including low premiums, but these premiums will often escalate exponentially once the term is over.
While term insurance can be the right choice for some specific situations, if you’re looking for long-term coverage that grows with you throughout your lifetime, term insurance isn’t the economically efficient choice.
Your insurance advisor can help walk you through the different types of life insurance to find the solution that best fits your goals and your life.
Myth #4: I already have a policy, so I’m good to go.
It’s natural to just file away your life insurance policy once you’ve purchased it, checking it off your adult “to-do” list and not giving it another thought. But, life insurance is one of the most important purchases you will ever make. Once you have your policy in place, it’s important to review your policy and contract every three years or so to make sure it still fits with your current lifestyle and needs.
Life happens, and your policy should keep up with those changes too. Here are a few examples that would require an update to your policy:
- If your beneficiary was a spouse who has died or that you’ve separated from, you will need to update your designated beneficiary.
- If you have children, you may want to adjust your policy to ensure they will be taken care of in case you die.
- A new home purchase may increase the longer-term financial needs of your family if you were to pass away unexpectedly.
Checking your policy coverage regularly will let you decide if your policy still fits with your current lifestyle and your anticipated future needs. You can also look at an adaptable life insurance policy that you can modify as you age.
Myth #5: I’m still young, so I have lots of time to buy life insurance.
Life insurance premiums are determined by a number of factors, including your age, lifestyle and your overall health. The younger and healthier you are when you purchase life insurance (term or permanent), the lower your premiums will be.
Being able to build an affordable and flexible insurance plan early on will provide peace of mind to you and your loved ones.
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