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The Truth and Lies about Life Insurance

The Truth and Lies about Life Insurance

Below are some common lies, and more importantly, truths that you need to know about life insurance.

  1. Employee-based life insurance is enough.  This is really not true, because most employee-based policies may only be equivalent to twice the amount of your current base salary.  In addition, base salary will not usually include bonuses, commissions, or any secondary income.  Even if you do have enough coverage through your employer (which should be 8 to 10 times your base salary), when you leave the company, the life insurance policy may become invalid and void.
  2. Homemakers do not need life insurance.  Everyone’s life has value, and just because a person is not the main bread winner of the home does not means they should not be covered.  Consider the scenario that something tragic happens to a stay-at-home spouse; someone will need to be hired to clean, cook, and offer child care (if necessary).
  3. Certain medical conditions will disqualify you for life insurance.  This is not necessarily true, because many companies now include certain health issues.  There are also policies that do not include health conditions (although these policies may cost more).
  4. You may think that you are too young to buy life insurance.  In reality, it may be wise to purchase life insurance when you are younger, because premiums may be at their lowest.  The longer you wait, the more costly life insurance premiums will be.  In addition, as a person ages, the greater the risk of contracting a medical condition that can raise the cost of your policy.
  5. You may believe that investing your on-hand cash is a better choice than paying the monthly fee, to maintain a quality life insurance policy.  This is a very risky financial move, because since the stock market is not guaranteed, the question remains: will you have enough money invested to pay off your current debt, and also provide all the financial needs of your family?  An insurance policy on your life will guarantee a payment (almost immediately) of full benefits.
  6. Once a life insurance policy is purchased, then you never have to consider it again.  This is a common myth.  Benefits of the policy are calculated based on the assets and liabilities at the time of the purchase.  Over time, salaries, assets, and other personal circumstances change.  Some life changes have a direct impact on the amount of life insurance coverage you may need.  It is advised to review your policy annually or when there is a birth, death, marriage, or divorce that directly impacts your life.