Life insurance brokers are always pushing policies so it’s difficult to determine whether their arguments hold any truth or if it’s just a biased sales approach.
While both cases are true, there are some common myths that people have fallen prey to. These myths can cause a lot of problems for families. Let’s look at 8 of the most common myths about life insurance. Read also: What You Should Know About Survivorship Life Insurance.
Myth 1: Insurance Coverage Should be Double a Person’s Annual Income
This is a common myth that needs to be put in its place. The amount of life insurance is dependent on the amount required to pay the following:
- Funeral Costs
- Medical Bills
- Debts
- Family Financial Support
Don’t settle for a myth. Perform a financial analysis to see how much coverage is necessary. Sometimes this amount might equate into double a person’s annual income, but that’s just a coincidence. A broker can help determine what policy is best for a specific income.
Myth 2: Single People with No Dependents Don’t Need Life Insurance
Nothing will make an expert laugh harder than this myth – even though life insurance is no laughing matter. It’s just that they know that everyone needs enough life insurance coverage to cover their final expenses. It’s also worth noting that if you were in debt, then your closest relative would be responsible for paying it off. Even single people with no dependents need to search for a life insurance broker to help find the deal that’s right for them. Read also: Seniors Can Now Pay Less for Life Insurance.
Myth 3: Life Insurance Premiums are Tax Deductible
This is not true in most cases. In fact, the only way that life insurance premiums can be deducted is if the policyholder is self-employed. On top of that, the policyholder must be able to prove that the coverage is being used to insure the business. If so, then the premium can be deducted on Schedule C of the 1040 Form.
Myth 4: Work Coverage is Sufficient
This is not always the case. Again, each person’s needs are different. For example, single people with no dependents might be okay with just employer-paid coverage. However, those with dependents and estate costs might want to invest in additional policies. A broker will be able to help determine whether this is true or not.
Myth 5: Everyone Must Have Life Insurance
While we’re looking at myths, let’s go ahead and bust this one. Although most people need some form of life insurance, this is not always the case. So to say that everybody must have life insurance is not true. Wealthy individuals are capable of self-insuring their assets. Furthermore, many people opt to pay for their own final expenses ahead of time. There are several different options available but the easiest way is to pay the premium. Read also: Things you Really Need to Know about Senior Life Insurance.
Myth 6: It’s Better to Invest Money Rather than Have Life Insurance
Nope! There is a point when it’s possible to self-insure but for the average Joe, this myth is not true. As mentioned in the above myth, wealthy people have the option to self-insure. The funny thing is that many of them have policies too. That should tell the average person just how important life insurance is. Unless you have a million bucks saved up in the bank, you will need life insurance.
Myth 7: It’s Impossible for Someone with Health Problems to get Life Insurance
Life insurance applicants are divided into numerous categories. These categories range from low to high risk and are determined by the following:
- Age
- Medical Records
- Drug History
- Family History
All brokers are different in the way that they determine the category that an applicant falls under. Those who have health problems are likely to pay a higher premium. There are several things that can be done over time to lower these costs. For example, if a smoker puts down cigarettes, then they will eventually get lower premiums. It’s not at all impossible for those with health problems to get life insurance coverage. Myth busted. Time to move onto the next. Read also: Understanding Whole Life Insurance.
Myth 8: It’s Okay to Skip Life Insurance in a Spouse has their Own Policy
Enough people opt out of life insurance for this reason to make it the final myth to explore. Today’s economy forces many families to have two incomes just to meet their financial requirements. In this case, both members should have a life insurance policy.
Now let’s look at the other side of the picture. Does a stay-at-home mother/father who doesn’t contribute to the family income need to be covered? The answer is most definitely yes. The final expenses alone are enough to throw any budget out of whack. This myth doesn’t hold any truth. However, a spouse who doesn’t contribute to the family income only needs the bare minimum coverage. A life insurance broker can help determine the best coverage. Read also: 5 Valuable Life Insurance Tips to Consider When Buying Insurance.