Myths are fun to read about in history books or fantasy novels, but they’re no fun when it comes to life insurance. Along with home and health insurance, life insurance coverage is an important part of your financial plan, but it’s sometimes confusing to deal with. This often drives people to forgo life insurance coverage – some 40 percent of Americans lack coverage, according to J.D. Power.
Many people have misunderstandings about their coverage, often resulting in decisions that could place them and their families at financial risk. Financial stability is a concern for aging adults. Many policies ensure financial flexibility with a reliable retirement plan or annuity, but if you need cash, you can also sell your structured settlement. Understanding the truth behind some of the most common life insurance myths can help you make the right choices about your coverage.
Myth #1: Life insurance is too expensive
Many people assume that life insurance is an expensive affair that they would be better off without, financially speaking. However, the vast majority of life insurance policies are actually cheaper than you think. For instance, Nationally-known life insurance company State Farm offers $250,000 of 20-year term coverage for less than $15 per month or $175 per annum.
IENetwork offers a free helpful mobile app that provides up-to-date life insurance quotes from over 100 different carriers. Available for Apple and Android devices, Mobile Life Insurance Quotes offers customizable quote results with policy fees included for all 50 states.
Myth #2: You don’t need life insurance if you’re single and young
Anything can happen in life, even if you’re young and single. In the event that something does happen, you should have at least enough life insurance to cover medical expenses, funeral expenses and personal debts. Otherwise, you might end up leaving behind unpaid debts for your family or executor to worry about.
Myth #3: You don’t need a separate life insurance policy if you have one through your job
It’s great to have life insurance through your employer. However, if you decide to change jobs, don’t have enough qualifying work hours, decide to retire or end up losing your job altogether, you’ll also lose your coverage. Having a separate life insurance policy allows you to keep your coverage no matter where you go. If you’re still interested in keeping your employer’s coverage, there’s always COBRA. According to information gathered by eHealthInsurance, COBRA coverage lets you continue your employer-sponsored insurance, although you may end up covering up to 102 percent of the monthly premium.
Myth #4: You’ll only benefit from life insurance if you have kids
Not so fast – life insurance comes in handy if you’re married and your spouse depends on you for support, or if you’re taking care of your parents, grandparents or other dependents besides your children. Not only will you be able to leave behind enough to have your spouse and dependents taken care of, but your own expenses will be taken care of, as well.
Myth #5: There’s no real difference between life insurance policies
Contrary to popular belief, there are a few distinct differences between common life insurance policies. As USA.gov explains, term life policies are designed to last for a finite period of time, usually ending sometime before you pass away. Term policies are cheaper, but they have no cash value if you cease payment on your policy.
Permanent life insurance, on the other hand, lasts until the day you die. The policies also feature a tax-privileged savings component, meaning that a portion of your premium is set aside for you to use in the future, according to Forbes. Permanent policies usually cost more than term life insurance.
Creative Commons image by 401 (K) 2013