It’s safe to assume that there are quite a few common misconceptions about life insurance. Many people understand the basic concept of life insurance and why it’s important to have life insurance when you get married and start a family, but beyond that, it can be difficult to tell fact from fiction.
While policies vary from company to company, it helps to be familiar with the basics of how life insurance works. The following are some of the most common myths about life insurance and what the truth actually is:
1. Only one spouse needs life insurance
In many cases, it’s better for both spouses to have life insurance, even if one doesn’t work. The reason: income isn’t the only sort of financial value a spouse can provide for the marriage.
Stay-at-home parents are a perfect example--if something were to happen to the stay-at-home parent, all of a sudden the working parent has childcare and housekeeping expenses to worry about, which life insurance death benefits could cover.
2. You never need life insurance once you retire
There are actually a number of reasons why someone would want to have life insurance when they retire. The following are some of the most common reasons:
1. To be deliberate about legacy planning
2. To continue to provide for children and/or grandchildren
3. You already have a permanent life insurance policy that you want to keep active so that you can use its cash value to supplement retirement income
3. You don’t need life insurance if you already have savings
This could be true if you had enough savings to support your dependents for the rest of their lives and no debt to pay off… but for most people that simply isn’t the case. A life insurance policy often serves as a backup plan in case you die before achieving your long-term savings goals.
That said, no matter how much you have in savings, you could still need life insurance for reasons other than providing a financial safety net, such as estate planning, supplementing retirement income, and more.
4. You only need life insurance from your job
While it’s good that your job provides some life insurance, it’s good to find out exactly how much it would cover because it’s not always enough. Generally speaking group plans that you can get on through your employer will not offer a death benefit that is the recommended 10-15 times your annual income, so it may be worth looking into supplemental life insurance through a private company.
The bottom line
Rather than listening to the myths about life insurance, it’s good to understand the truth so that you can find out which life insurance policy will best suit your needs. Don’t hesitate to get in touch with a professional expert to help you navigate your options.
John Smith is digital marketing manager.