Apr 14
life insurance myths - Quote

MYTH # 1 –  The Breadwinner Myth

I only need life insurance if I am the primary breadwinner in my family.

Whether or not you work, your family will miss your contribution to the household if it disappears. If you do work, even a modest income may help fund important items and family activities.

And though stay-at-home parents may not provide a cash income, they often provide valuable services such as childcare, cooking, housecleaning and household management, the replacement costs of which are often severely underestimated.  Last time we checked it cost $24,000/yr. just for child care 5 days a week full time + $2,880/yr. for 1 day per week house cleaning.  So you can see it is no underestimation to realize the loss of a non-working care giver can easily go over $30,000+ per year. Nothing to sneeze at.

MYTH # 2 – The Renewal Myth

If I buy a term policy and find that I still need protection when the term ends, I can always renew the policy.

Term policies are quite popular with many young families, and for good reason: they typically offer the greatest coverage for the lowest cost. Term insurance provides protection for a specific period of time (the ‘term'), and can be ideal for people who feel they have temporary needs, such as a mortgage or a child's education.

However, many families realize that even after the kids are gone, their need for insurance continues – to provide income for a surviving spouse, eliminate debts, pay taxes, etc. Because premium rates increase with age, renewing your policy when the term expires can be prohibitively expensive. Moreover, poor health may make renewal impossible. Investigate Term to 100 or Whole Life options if this concerns you.

MYTH # 3 – Only For The Young Myth

I only need life insurance when my kids are young and my financial obligations are the greatest. There is no question that insurance needs are great when your children are young, what with college planning, mortgage payments and the costs involved in raising your kids.

Although for people with insurance needs later in life, permanent insurance is often a good choice.  In addition to providing the opportunity for lifelong protection, permanent policies accumulate cash value that can be borrowed against or withdrawn, though doing so may affect the death benefit and have tax consequences.

While permanent insurance premiums are generally higher than term premiums when first purchased, they typically do not increase over time and can stop completely later in life, even as your coverage continues, depending on your policy.

Don't rely on Social Security because it probably won't be there by the time you need it.

MYTH # 4 – Life Insurance Investment Myth

I can get a better rate of return if I invest my money elsewhere. We agree. This isn't a myth (just making sure you're awake). That’s why Term Life insurance is recommended for most families. With Term Life Insurance you pay only for pure protection (no investment portion), so you get the protection you need at a substantially lower cost, and it leaves you free to invest your money in a good mutual fund, real estate, etc…


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