Life insurance has become an ardent necessity in modern times. While the life expectancy of the modern world has gone up, and people rarely die from unnatural causes, every death that does happen before time brings with it an immense financial and emotional burden. Not only does it devastate a family that depended on the deceased, but it also comes with a shock that cripples them from looking towards alternate sources of income immediately. This is especially worse for families that have a single breadwinner.
Whole life insurance is indispensable, it comes with a set of myths that discourage people from getting any insurance. Here we bust 5 myths that should relieve you and let you buy insurance freely.
1) Life insurance is expensive:
While we realize that the definition of expensive changes from person to person and with circumstance, life insurance may not break your back like you expect it to. In fact, most people overestimate the value of life insurance by at least 4 times, according to LIMRA’s 2020 Insurance Barometer Study. In fact, life insurance can be as little as 40$ a month in your 20s and 30s, for a 500,000$ annual coverage; although the cost goes up as you age, and becomes averse to more diseases. Term plans like personal liability coverage provide great relative value, where the cover is at least 10 times that of the premium paid. Moreover, your place of work often pays for your insurance, which is something we can’t ignore. Depending on which country you’re from, your government may have medicare that covers every citizen, too.
2) Life insurance is for older people:
While it’s definitely true that increased age predisposes to health issues more, and thus healthcare is predominantly directed at the old, emergency or chronic health issues rarely see age. In fact, the median age for a lot of senile diseases has a shift to younger age groups and even college students, as our lifestyle choices become more chaotic in a consumerist society. If you smoke, drink, lack exercise, or have chronic health conditions since childhood, it’s probably wise to buy yourself insurance as early as your 20s. Even if you think you’re fine, remember that accidents often land you in the emergency, a fate that you may not survive. Moreover, it’s also smart to make use of lower premiums for lower age groups and invest in long term plans that extend to older age, or into retirement plans. As long as you have family, children, or spouses, dependent on you, age is just a number in getting life insurance.
3) Employer-provided group insurance is adequate:
While the health insurance provided by your employer may be adequate for you, this is rarely true for life insurance. This is because these employer-provided benefits rarely cover the living expenses of your family, as we usually tend to lead lifestyles that match our pay grade but life insurance rarely is up to that scale. Moreover, even if you think it is enough, remember that this life insurance is limited to how long you work in this company, and also ceases to exist after retirement. Also, employer-provided insurance covers a year or 2 of your salary, and you do not get a choice in the coverage either. Keeping all this in mind, while it’s absolutely fine to take employer coverage if it doesn’t cost you anything, it’s also wise to have a separate policy for yourself. Said policy is especially beneficial if bought close to your retirement, so it lasts you well into your old age.
4) Life insurance should be limited to earners:
Breadwinners do need life insurance cover more urgently than stay at home spouses, or those who do not earn as much, but if you think that others do not need it at all, you are mistaken. This is because we base our ideas of wealth on money as a physical entity, and not on factors that churn money indirectly. Homemakers, for example, take the burden off of a working spouse, by doing the working at home, and tending to kids, leaving the worker more time to spend at work and earn more. Secondly, while working members have a higher probability of coming across life-risking situations, death is arbitrary and can affect anyone, in the event of which, life insurance coverage goes a long way in easing the financial burdens that come with death.
5) Life insurance payouts are taxed:
This happens to be one of the major reasons why a lot of people loathe the idea of getting insurance, but this is explicitly not true. Life insurance is exempt from any Income tax or Capital Gains tax, although depending on the value of your estate, and Inheritance tax may be charged. This can be prevented by placing your insurance in a trust, which also boosts the time in which your beneficiaries get the money.