Life Insurance Awareness Month: 5 Top Myths Debunked

Thursday, September 10, 2020, 6:00 AM | Leave Comment

September is Life Insurance Awareness Month, a campaign aimed at providing awareness about life insurance and how it can protect one’s future financial plans.

While having a life insurance policy can play a key role in achieving financial security, there are common misconceptions about the specifics of obtaining life insurance, leaving many individuals uninsured entirely or underinsured.

Here are five of the biggest myths surrounding life insurance debunked.

  1. “My life insurance coverage through my employer is enough”

    While having a life insurance policy through your employer is a great benefit to have in the workforce, for most individuals and families, employer-provided coverage does not provide adequate coverage. In fact, one in five Americans believes they don’t have enough coverage through their existing policy.

    Experts recommend having 10-15x your annual salary in a life insurance policy to ensure that your obligations are met and that if you have dependents, they would be taken care of. Additionally, it’s important to note that a life insurance policy through your employer is usually non-transferable so if you were to switch jobs, you would be left without coverage.

  2. “I’m young so I don’t need life insurance yet”

    While it is generally true that if you are younger, you have less financial responsibilities and obligations, it does not necessarily mean that you don’t need coverage. Even if you aren’t married, don’t have children or if you don’t have assets at the moment, it could still be worth looking into a policy now if you could see yourself starting a family or making a large purchase, such as a home, within the next five to ten years. This is because when you are younger and healthier, you can lock in a term life insurance rate at a lower premium that could save you money in the long run if your lifestyle were to change in the near future.

  3. “I’m not the primary source of income in my household so I don’t need coverage”

    If you are a stay-at-home parent or work part-time and your partner is the main “breadwinner,” you might feel as though you don’t need to have a policy. Even though it’s true that the person who provides the primary source of income in your house should have a life insurance policy, that doesn’t mean that you don’t need one as well.

    For example, as a stay-at-home mom, even though you don’t bring home a salary, there is still a numerical figure that can be put on your time and efforts surrounding the care of your family and household. If you were to unexpectedly pass away, it is important to have some kind of coverage to ensure that your children would still be cared for the way you intend on.

  4. “I can only make my beneficiary an immediate family member”

    The beneficiary on your life insurance policy is the person or people that would receive a payout from your policy if you were to pass away. While you will be required to name a beneficiary on your policy, that does not necessarily mean that your beneficiary has to be one person or even a member of your immediate family.

    Additionally, you are able to list multiple individuals as beneficiaries and designate a percentage to be allocated to each. For example, some individuals that have young children might not want to directly name them as their beneficiary to avoid the death benefit being held up in the court system.

    Instead, they might name a trusted adult as their beneficiary to manage their children’s finances until they turn 18, or leave the funds to a living trust where a trustee manages the account. Some individuals can also choose to leave all or a portion of their death benefit to a designated charity by adding a charitable-giving rider to their policy.

    Additionally, if you have a pet at home that you would want to be financially taken care of, you are also able to designate a portion of your policy to an individual who would be in charge of their care if you were to unexpectedly pass away.

  5. “Life insurance is expensive and I’d rather put the money into a savings account”

    While having a savings account is certainly an important step to take in protecting your future, remember that securing a life insurance policy is another important component to have in your overall financial portfolio. A savings account will help if a large, unexpected cost were to arise but a life insurance policy protects your family if you were to pass away.

    Take into consideration that a life insurance policy will protect your assets and your lost income so while allocating funds for a savings account is important now, budgeting for a life insurance policy will also be important in the future.

    It is a common thought that life insurance is expensive to secure. While a whole life insurance policy is known to be a larger cost each month, term life insurance can actually be quite affordable in most circumstances, especially if you secure a policy when you are younger and healthier.

    Because whole life insurance can also be used as an investment vehicle, it can be anywhere from 5 to 15 times the amount of term life insurance per month, so it is important to look into a term life policy if you only weren’t looking to use a life insurance policy as an investment.

    When looking into a term life insurance policy for yourself, it is best to compare different rates because there are various factors that go into determining what your actual cost of the premium will be per month.

    The life insurance company will need to know the term for the policy and the amount of coverage you are looking to secure. You will also most likely be required to complete a medical exam to determine your various health factors such as family history, age, gender, and smoker versus nonsmoker status.

    Once underwriters review your profile, they will determine your cost per month. Remember that a $250,000 policy for a 30-year-old healthy female or male averages under $20 per month. While this is obviously an added cost to your monthly budget, securing a life insurance policy can actually be quite affordable considering the level of protection it offers for your future.

With September being Life Insurance Awareness Month, this might be a good time to look into your adjusting policy or consider obtaining a policy if you don’t have one yet. Because there are so many misconceptions surrounding life insurance, many individuals are left unprotected or underinsured.

Debunking some of these common myths can help you find the right coverage to meet your needs, while also protecting your financial future.

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