6 myths about buying life insurance

When it comes to purchasing life insurance, there are numerous myths and misconceptions. You may believe that life insurance is prohibitively expensive or that it is only necessary as you get older.

Because life insurance is not required by law, unlike car insurance, many people are unaware of its value. In reality, regardless of age, income, or dependents, almost everyone can benefit from having some type of life insurance.

Myth 1: I’m not old enough to buy life insurance

One of the most common misconceptions about life insurance is that you only need it when you're older. In reality, there are numerous advantages to purchasing life insurance while you are young and healthy. When you're young, life insurance is usually much cheaper, and if you buy a term life insurance policy, you may be able to roll it over into permanent coverage, such as whole life insurance, when you're older.

"While no one likes to think about death, planning for it by purchasing life insurance is prudent and leaves an extraordinary legacy." The cost of term life insurance is determined by factors such as your age, health, driving record, and credit. "As a result, the sooner you apply for a policy, the more coverage you may be able to afford," says Laura Adams, an insurance expert. Purchasing life insurance when you are young may end up being much less expensive than waiting until you are 50 or 60 to purchase a permanent policy.

Myth 2: Life insurance is expensive

Another common misconception about life insurance is its cost. In fact, according to life insurance statistics, roughly half of all people overestimate the cost of term life insurance. The cost of life insurance, like the cost of other types of insurance, varies by individual and can be determined by your age, gender, and overall health.

"One of the most common misconceptions about life insurance is that it is too expensive or unaffordable for the average person or family. "A $500,000 term life policy may cost less than $300 per year if you're relatively young and healthy," Adams adds.

Not only can life insurance provide valuable protection while you're young, but it's also possible to find a policy that fits within your budget. Term life insurance policies, which are popular among younger people, are relatively inexpensive and provide coverage for a set number of years.

Myth 3: I don’t make enough money to need life insurance

Some people believe that life insurance is only necessary for wealthy people, but this is another myth. "Many people also mistakenly believe that you only need life insurance if you're wealthy," Adams says. One could argue that having a life insurance policy is especially important for those who have less to leave their heirs. The goal of life insurance is to protect those who rely on you physically or financially after your death."

If you have a living spouse, children, or other family members who would require financial support if you died unexpectedly, you should think about purchasing a life insurance policy.

Myth 4: Stay-at-home parents don’t need life insurance

If you are a stay-at-home parent, don't think you can avoid purchasing life insurance. "Another insurance myth is that if you don't earn a living, you don't need a life insurance policy." That is incorrect because many families rely on stay-at-home parents to do important work. "If they weren't there, the surviving spouse or partner would have to pay for childcare and possibly other household tasks," Adams explains.

Consider all of the roles you play that would otherwise be costly to your family. In many cases, families with one stay-at-home parent can avoid costly expenses such as tutors, day care centers, and babysitters. Even if you don't have a full-time job, your children and spouse will most likely be financially impacted if you die unexpectedly.

Myth 5: My group life insurance is sufficient

Many people receive life insurance as part of their employer-provided benefits. However, unlike health or dental insurance, group life insurance through your employer may not be adequate for your family's needs.

Group life insurance is typically based on your salary, and depending on how much financial support your family requires, you may require more coverage than what you're currently receiving. If you have group life insurance, it's a good idea to supplement it with a personal policy that has higher coverage limits and a variety of riders for tailored protection.

Myth 6: I already have savings so I do not need life insurance

Saving money is a good financial habit to develop, but even if you have a sizable emergency fund, don't think you can go without life insurance. In general, it is not prudent to rely solely on savings to support your family members if you were to die unexpectedly.

Here's why: Even the most substantial savings accounts can be depleted in the event of a major life change. For example, if you have a medical emergency, a portion of the money in your savings account may be used to pay for hospital bills, leaving your account much smaller than it was previously. In the event of your death, your family members may not have enough money in savings to maintain their current standard of living.

The death benefit of life insurance is essentially locked up until you die. It is guaranteed money that your loved ones will have access to (in most cases), and you do not have to worry about spending it all before then.

Frequently asked questions

What is the best life insurance company?

There are numerous life insurance providers on the market, each with their own set of advantages and disadvantages. Mutual of Omaha, State Farm, Prudential, Northwestern Mutual, and Guardian are some of the best life insurance companies we've found. However, it is critical to shop around and compare providers based on your specific needs.

How do I know how much life insurance to buy?

Everyone's requirements for life insurance are unique. Consider how much it would cost your loved ones to maintain their current lifestyle without your income to determine how much life insurance you require. Take into account expenses such as your mortgage, school tuition, and other debts. There are also several models available to help you determine your coverage requirements, such as the DIME formula and the shortfall approach.

What is the difference between term life vs. whole life insurance?

Term and whole life insurance are two of the most common types of policies. A term life insurance policy protects you for a set amount of time, typically up to 30 years. A whole life insurance policy protects you for the rest of your life. Term life insurance is usually less expensive than whole life insurance, but whole life insurance provides more comprehensive coverage.

How can you save money on life insurance?

In contrast to home or auto insurance, most life insurance companies do not provide discounts. Purchasing a policy while you are young and healthy is the best way to save money on life insurance. Furthermore, if you improve your health, quit smoking, and work with your doctor to manage pre-existing conditions, you may be able to get a lower life insurance premium.