When we think about our futures, it’s customary to construct a mental plan. This plan can detail your hopes and aspirations, but it also should involve future financial planning for you and your family. Many people, especially young adults, rarely take the time to consider what may happen once they pass on. If you abruptly die, or even if your passing is something you see coming, owning a life insurance policy can provide financial help to your family when they need it the very most.
If your income is your household’s primary income, and you are no longer there to earn money, your insurance policy can help support your family. Your beneficiaries can use your death benefit to pay bills, pay off any debts, cover funeral costs, or put into a savings account for a rainy day. Losing a family member is a tragic but inevitable hardship in life. However, having your family struggle to make ends meet after you’re gone is avoidable.
When looking into life insurance, myths and misconceptions usually follow us through the process. Cutting through these myths and gaining a strong understanding of how these insurance policies work can help you make an essential decision for your family’s future.
What Are Some Common Myths About Life Insurance?
Like all insurance products, life insurance can be confusing with all the formal terms and technicalities. Reading up on these basic myths can help you decipher the plan you need and help you understand the policy you’ve purchased.
I’m Single Without Dependents, So I Don’t Need Life Insurance
Being single and without children does not mean that your other family members won’t need any financial help after you’ve passed away. Someone will have to foot the bill for your end-of-life services and possibly your end-of-life medical assistance. If you have unpaid debts, debt collectors may target your parents or siblings to try to collect. If you do not have outstanding debt and want very minimal funeral services, a death benefit payout is ideal for securing a legacy in your memory. Your death benefit can be donated to a charity or perhaps to a college student in need.
Life Insurance Coverage Needs to Equal Two Times My Annual Salary
Your life insurance policy’s monetary value does not need to match a specific, predetermined amount. The cost of your policy may differ from your neighbour’s down the street. Your lifestyle, family, and potentially your debt are factors used to determine the amount of coverage you’ll need. Hometown Life Insurance has developed a life insurance calculator to assist you in understanding your needs for insurance. In addition, our team of licensed professionals are standing by, ready to assist you in finding the right coverage for your unique needs.
My Premium Costs Can Be Deductible
More often than not, this is not the case. If you are a business owner you may pay the life insurance premiums for your employee’s policy, you may be able to deduct the premium, but it would also be a benefit to your employee. On certain life insurance policies, you may also be able to claim the premium paid if the policy is assigned to a registered charity. But, for the vast majority of life insurance policyholders, it is not likely you will ever receive a deduction from your life insurance premiums.
Term Life Insurance Coverage Provided Through My Employer is Enough Coverage
Maybe, maybe not. If you are unmarried, have limited debt, and live on a modest income, your employer-based insurance benefits (provided term) may be all you need. However, if you have children, have substantial debt, are married, or are expecting estate taxes upon your death, you will likely require additional coverage.
Only Primary Income Earners Need Life Insurance
This is a misconception. The monetary cost of replacing a homemaker is vast. If you have children and their primary caregiver is no longer present, you would likely need daycare and possibly a housekeeper or cook to help while you’re at work. Insuring a stay-at-home spouse may be more important than you think.
I Should Purchase Term Insurance and Invest the Remainder for the Future
The differences between term life and permanent life insurance are distinct and should be thoroughly understood. The cost of coverage through term life can become increasingly expensive as the years go on. People who will need to be covered upon their death would likely be better off with permanent coverage. The complete premium projections for an initially more expensive permanent policy may cost less than the ongoing premiums of term life policies, which tend to be more initially affordable.
Those who choose a term policy are also risking becoming uninsurable after the term of their policy expires as their current policy renewal may become too expensive. If their term policy ends, and they are anticipating estate taxes upon their death, they may have difficulty securing additional life insurance later in life due to health concerns. These uncertainties can be avoided with a permanent policy.
It Would Be More Beneficial To Invest My Own Money Rather Than Purchasing Life Insurance
This is incorrect. Building up enough money to counteract the need for life insurance can take decades. If you have dependents, and you were to pass away while they were still reliant on you financially, they can deplete your savings quickly, then be left with nothing. If you are abundantly wealthy, your financial portfolio may still be insufficient. You risk your estate taxes eating up a considerable amount of your wealth, leaving your dependents with much less than you anticipated.
My Life Insurance Policy Will Expire After the Initial Term
When you purchase a term insurance policy, you will try to do your best to estimate how long you may need coverage. For example, you may decide that a 10-year term is sufficient to protect you and your family. However, as time goes on, you may now find yourself in a situation where you require coverage for a longer period of time. Perhaps you welcomed another child to the family, or you moved into a larger house with a new mortgage. Whatever the reason, your term policy will provide you with flexibility.
You are guaranteed to have the ability to renew your policy for another term (at a higher price) without any medical underwriting. You may also choose to extend your coverage to a longer term (say 20 years) so it better matches your updated needs. Starting out with term insurance provides you with the flexibility to make adjustments in the future as your life evolves – so don’t worry if your plans change!
Our experienced insurance agents at Hometown Life Insurance take pride in finding the right insurance policy for our clients. We are well versed in their industry and can help separate myths from fact and determine the amount of coverage you’ll likely need.
How Do I Learn More?
Now that we have debunked some of the most common myths about life insurance, our Hometown team would be happy to continue your search for the right coverage with you. We are here to answer your questions, provide you with helpful resources and support you throughout the life of your policy to ensure you and your family remain securely protected! Get started by contacting us today.
