Overview
Life insurance is an important investment if you have loved ones who rely on your income to maintain their lifestyle. Losing someone is hard enough. Even after your death, you don’t want to compound your family’s emotional pain with financial stress. Still, there are so many myths about life insurance that it might make you hesitant to shop around for a policy. Let’s explore – and debunk – the most common myths together.
Myth #1: You don’t need life insurance coverage until you’re older.
You might think that life insurance is something you don’t need to think about until you’re much older. Although the life expectancy in the US is close to 80 years old, according to MacroTrends.net, that doesn’t mean you shouldn’t buy life insurance now.
First of all, that’s the life expectancy. Things happen, including accidents and illness. If you already have a family, it’s likely they aren’t at all prepared for a worst-case scenario if you’re in your 20s, 30s, or even 40s. No one wants to think about their own death. I feel squeamish even writing this. But it’s important to think about estate planning, and life insurance is a key part of estate planning, as soon as you have a spouse or heirs.
Aside from preparing for the worst, you can actually lock in lower rates on life insurance the younger you are. Rates rise as you approach 40, 50 and beyond. You can always purchase a low-cost term life insurance policy now and convert it to a whole life policy when you have more money to spend.
Myth #2: You don’t need life insurance if you have no family or heirs.
Life insurance becomes less crucial if you don’t have a family. But, again, you can lock in lower rates the younger you are. If you can afford to invest in whole life insurance, you can save even more money. According to a blog post by MassMutual.com, a whole life policy with a $100,000 death benefit would cost a healthy, non-smoking 21-year-old female $1,106 per year. If that same person waits until she’s 40, she’d pay $2,358 per year.
A whole life policy comes with additional advantages beyond the death benefit. You can borrow from the policy’s cash value. If you grow older and still have no heirs, you can name a favorite charity as a beneficiary, allowing your legacy to live on.
Myth #3: Life insurance is expensive.
A recent survey from LIMRA and Life Happens found that 52% of the GenX cohort and 48% of millennials do not have enough – or any – life insurance due to the perceived cost. Nearly three-quarters (72%) of those polled overestimated the cost of a term life insurance policy.
Yet, when the survey asked people how they came up with their cost estimate, 54% said it was based on “gut instinct” or a “wild guess.” If you believe this myth about life insurance, you’re clearly not alone.
Here’s the reality: According to MassMutual stats, a 21-year-old non-smoking woman in excellent health can expect to pay about $113 a year for a 20-year term life policy with a $100,000 benefit. That’s less than what you probably pay for Netflix (or Amazon Prime) in a year.
Myth #4: The life insurance from your job offers enough coverage.
Many employers offer Group Life insurance coverage as a voluntary benefit. Sometimes your employer pays for it. Sometimes the cost gets deducted from your paycheck with pre-tax dollars. And sometimes you split the cost.
More than half (55%) of working adults polled by LIMRA and Life Happens said they have insurance through their employer. Group life offers many advantages, including a straightforward policy, low costs, and tax advantages, since the first $50,000 in coverage isn’t taxable.
However, group life policies tend to be one-size-fits-all and often don’t provide enough coverage. If you only want to cover your funeral expenses to make things easier for your loved ones, Group Life may be enough. But keep in mind that if you leave your job, you may lose your coverage.
If you have a spouse or family relying on your income, it’s worth looking into a private policy.
Myth #5: No one will insure you if you’re older, sick, or have a pre-existing condition.
Age and pre-existing medical conditions, along with smoking, can increase your insurance premiums and decrease your odds of approval. But it’s not impossible to get a life insurance policy even if you have a medical condition or illness. How well you manage the illness – through medication, lifestyle and regular check-ups – can influence your insurance costs and policy approval.
The length of time since diagnosis is also a factor. For instance, if you have type 2 diabetes and have kept it under control for decades, insurance companies may consider you a lower risk than someone who isn’t managing the disease. Similarly, if you had cancer years ago and have been in remission, you might be considered more insurable than someone with a new diagnosis.
It’s true that costs rise as you get older. You might pay more, but you can get a policy at any age – you just need to shop around. A guaranteed issue whole life insurance policy offers coverage for individuals ages 65 to 85, regardless of risk factors or health conditions. However, read the fine print of your policy carefully because some policies won’t pay out until two to three years after you purchase the policy. https://www.ethos.com/faq/what-features-giwl/
Myth #6: You need a medical exam to get a policy.
Typically, a life insurance company requires a medical exam before underwriting your policy. Factors such as family history, blood pressure, cholesterol levels, and whether or not you smoke can affect your premium costs and eligibility.
However, if you’d rather skip the medical exam for any reason, you can still find an insurance company that will write a policy. It may cost more than you would otherwise pay, especially if you are a non-smoker in good health. You may qualify for a simplified issue policy, a guaranteed issue policy, or a Group Life policy through your employer, according to Progressive.com
by your friends at The Daily Navigator
