4 Common life Insurance myths debunked

4 Common life Insurance myths debunked

Our gratitude and thanks go out to our sponsor of this post, USAA, in helping promote life insurance awareness.

When it comes to life insurance, 4 common life insurance myths need debunking. It's too important of a financial topic to believe the myths and not have this protection. We've all known people who've unexpectedly lost loved ones and the family was left with huge bills, no way to pay them, and worse, the ongoing needs of a grieving family. If you ask me, life insurance is not a financial burden, it's a love letter to your family.

#1 of 4 life insurance myths

Life insurance myths #1 It's too expensive – we can't afford to have any.

Statistics show that 82% of Americans overestimate the cost of life insurance.  In fact, the overestimate has been shown to be 2-3 times the true cost.

Truth: Life insurance is affordable. Term insurance is typically the least expensive form and is recommended when people have situations that will change in 20-30 years, like no longer having dependent children or a mortgage. Even if all you can afford is a small policy, that would at least provide your family some money if the unthinkable were to happen.

So how much coverage do you need? Well, that actually depends on the individual, their family, and their goals. Minimum adequate life insurance coverage should fully pay for liabilities, help to supplement or replace lost income, pay for final expenses, and help pay for education costs for children (if applicable/desired). An easy acronym to remember what life insurance should cover:

• L – Liabilities
• I – Income for Survivors
• F – Final Expenses
• E – Education Costs

#2 of 4 life insurance myths

Only the breadwinner needs life insurance.

Truth: Even a stay-at-home spouse needs life insurance. Why? Because if a spouse isn't there to do the things they do on a regular basis, how much would it cost for you to replace everything they do? Would you need all-day child care? After school care? Housework and meal help? Elder care assistance? The list could go on and on, and paying others for all that help would add up fast.

#3 of 4 life insurance myths

I'm young, single, and don't have any dependents, so I don't need life insurance yet.

Truth: Getting life insurance when you're younger and healthier is less expensive since rates are based on age, health history, and health risks. By getting life insurance at an earlier age, you can both lock in your ability to purchase insurance, and a low monthly rate. Plus, life events you may not even think of can trigger the need for life insurance.

J.J. Montanaro, Certified Financial Planner of USAA says, “What if you have things like $100,000 in student loans that your parents co-signed for you? Those won't be forgiven.”  And I'll add, what about other joint loans like homes or cars? Life insurance would cover those things.

#4 of 4 life insurance myths

There is no benefit for me to have life insurance.

Truth: You may be unaware that there are actually some living benefits to holding life insurance.

• Access to emergency cash: In addition to having an emergency savings account, a permanent life insurance plan with a cash value can provide you additional emergency funds; and typically without taxes or penalties.
• Additional retirement protection: A 2015 Transamerica Center survey reported that 21% of surveyed retirees were still actively paying for a mortgage, and 25% were trying to manage credit card debt. A permanent policy’s cash value can provide a stable source of emergency supplemental retirement income that is not impacted by short-term market volatility.
• Term can turn perm. Even if your budget is not ready for a permanent policy, a term policy gives you the protection you need today, with the option of converting it into a permanent policy with cash value later.
• Protects against health, hobby, and habit changes. One of the main benefits of buying a life insurance policy now is that it protects you from lifestyle changes – both expected and unexpected. If you decide to pick-up a dangerous hobby or unhealthy habit, or you had a serious change in your life, the guaranteed insurability features of a policy locks in your insurability for the future.