There are a lot of people out there who still believe that life insurance is an unnecessary cost. This feeling is certainly understandable; sure, we have the ability to live without it. But what's important to remember is that the money isn't for you, it's to assist your loved ones in the future.
With that being said, let's take a look at some of the more common life insurance myths, and where to look if you're in need of a policy. There are many life insurance options available to you, and it's important to understand the key differences between them.
This statement is incorrect for two very important reasons. First off, when you pay for a life insurance policy, you're not investing your money. It's more akin to car insurance; you have it when you need it, and hopefully, you won't need it. This point also argues against the bad investment. It's a smart idea to protect yourself and your loved ones in case of an unexpected emergency. What's worse: not being able to pay bills due to a loss of income, or having a safety net to ensure that life can go on? The answer should be fairly clear.
Unlike some other forms of insurance, which granted, can be more convoluted and misleading, life insurance policies are pretty straightforward. The two types of life insurance you can purchase are called 'term' and 'permanent' policies. The main difference here is in the title; with a term life insurance policy, you pay for a set number of years and have a nice sum to protect you against the unknown. After the term ends, you stop paying, and the coverage is no more. Some contracts last 7 to 10 years, while others end when you turn 95, at which point it loses its value.
With permanent life insurance, you not only receive a similar death benefit, but you also gain a valuable asset that you can borrow against later in life. And this may seem like more of an investment than term life insurance, but the kind of live coverage you receive is relatively the same. Premiums are also usually lower and can decrease with routine doctor's visits. If you're healthy, you'll pay less for your life insurance.
Many young people believe that they are impervious to pain and illness and therefore, don't need life insurance. The reality is that a small monthly payment, often set up through their company's health insurance plan, is a small price to pay for peace of mind. They won't need to invest more in a permanent insurance policy because a simple term life insurance plan that lasts 20 years will easily cover themselves and it can cover their new family. Term life insurance plans are a cost-effective and straightforward way to ease the stress that comes with youth so you can get out there and enjoy life.
Just because you're retired doesn't mean you shouldn't be smart and protect your family. Funeral costs are rising, and a good life insurance policy can cover everything your spouse, or even your children, might need. Some term life policies can also convert to permanent coverage, which means those years of investing will pay off, and give yourself an additional cash value. If you feel you don't have as much saved up for retirement, then this option may be perfect for you.
This belief is one of the most common mistakes families make. Say you started paying for a term life insurance policy through work and decided to keep it going until your kids graduate and leave for college. Then you decide to cancel the policy because you only needed it to protect your family. Even though they're out of the house, they can still benefit from coverage.
It's one of the tricky ways insurance companies make their money; they expect people to cancel their life insurance policies after they expire, and because of that, if the unfortunate scenario hits, the family that is no longer covered has to pay out of pocket. Keeping a life insurance policy going, even updating its terms to reflect the changes in your family, is always a smart move. It's always better to plan for something you hopefully won't need than to need it when it matters most.
The one way that life insurance is similar to services for your home, such as internet and cable, is that it costs less to bundle. Many people don't realize that their premiums will decrease if they choose a reliable provider, and consolidate all their insurance needs under one roof. And the sooner you learn this fact, the better off you'll be. If you start early you can set yourself up for success. And make sure to keep it going; if you decide to transfer an existing life insurance policy from term to permanent, it will still take up to a decade for its cash value to appear.
We all feel at times that things are hard, or too complicated, or just not worth it. Take a breath and relax. There is always a way to prepare for the unexpected and life insurance is a great place to start. And like many things in life, speaking to a live person can help you make the best decision for your family. A well-informed agent can walk you through all the fine print of a life insurance policy and explain how each type works, what your family would benefit from, and how to reduce your premiums. It's not impossible to protect yourself. All you need is a little forward planning.