Today’s 10 Biggest Life Insurance Myths

Life Insurance MythsCertain key elements of life insurance should be considered carefully in order to choose the right type and amount of coverage. However, the technical aspects are often less difficult to deal with for most people than trying to determine whether they need coverage and how much is required. The following are 10 of the most common myths surrounding life insurance:

Myth 1: You do not require coverage if you are single and do not have dependents
It is important for single people to consider life insurance to cover the cost of their personal debts, medical bills or funeral bills. Uninsured individuals may leave unpaid expenses that their loved ones or executors would be forced to deal with.

Myth 2: Life insurance coverage should be twice your annual salary
Your life insurance coverage is largely dependent on your specific situation. As such, you should take into account factors such as medical and funeral bills, mortgage expenses and your family’s needs. A cash flow analysis can also be very helpful in determining how much insurance you need.

Myth 3: Term life insurance through your employer is enough
While term coverage provided by your employer may be sufficient if you are single and of modest means, this may not always be the case. You may require additional coverage if you have a spouse or dependents or if your estate taxes will need to be paid off upon your death.

Myth 4: Life insurance premiums are tax-deductible
This is not always true since the cost of personal life insurance is only deductible if you are self-employed and the coverage is used for asset protection purposes.

Myth 5: Everyone must have life insurance
While most people require life insurance, those with sizable assets and no debts may not need it. In addition, life insurance can be optional if your medical and funeral costs are already covered.

Myth 6: The best approach is to buy term coverage and invest the difference
Although term life insurance is often cheaper then permanent life insurance, the cost of term life coverage increases with time. On the other hand, the premiums paid for permanent coverage often go on for many more years. It is also important to consider the risk of becoming un-insurable, which makes permanent coverage preferable.

Myth 7: A variable universal life policy is preferable to a regular universal life policy
Universal policies often pay competitive interest rates, with variable policies containing fees relating to the insurance and the security elements of the policy. This means that you may get lower cash value than an individual with a regular policy.

Myth 8: You do not need life insurance if you are not a breadwinner
Replacing the services offered by a deceased homemaker could be higher than you imagine, which is why it may be important to insure against the loss of such an individual.

Myth 9: You should include the return-of-premium rider to your policy

Different return-of-premium riders are available for policies offering this feature, but it may not be cost-effective. Your decision should depend on your investment objective and risk tolerance.

Myth 10: You are better off investing your money than buying life insurance

There may be no way to provide for your dependents if you die without coverage and your assets become depleted. As such, you may need some form of life coverage until the value of your assets is greater than that of your debts.

Charles is a passionate blogger and writes about life insurance topics.

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