Life insurance may sometimes seem complicated and confusing, given the many different providers, policies and coverages. It’s important to thoroughly research your options before making a choice, but – if you do your research online – it’s also important to consider the source of the information.
To help you separate fact from fiction, let’s dissect some common misconceptions:
1. The policy I get from my employer is enough.
Are you sure? When you receive the list of your benefits package on orientation day at a new job, you may see that life insurance is among them. This is good news, but it’s also important to understand when the coverage will begin, how much you’re covered for, and for what duration of time. Have you carefully calculated how much your loved ones would need to pay your final expenses, outstanding debt, and future living expenses?
There’s still risk involved. Your policy is dependent on your employment, so if layoffs occur in your company and you’re out of a job – poof, you’re no longer covered. The same predicament applies if you want to leave one job for another job opportunity that doesn’t offer life insurance benefits.
2. I don’t have income, so I don’t need life insurance.
Really? Not having income does not mean that you don’t have worth or that, if you were to suddenly die, your loved ones would not be affected financially, as well as emotionally. If you’re a stay-at-home mom, for example, all of the jobs you do – providing child care, fixing meals, cleaning the house, playing chauffeur and amateur psychologist – have value. If you passed away, it would be a difficult circumstance for the entire family.
3. I have a policy so I don’t need to worry about life insurance anymore.
False. Life is fluid, ever-changing, and so the needs of your family today may be different than they were five or 10 years ago. It’s important to review your policy periodically to determine if it fully reflects the current situation for you and your family.
4. Term life insurance is better than whole life insurance.
Not necessarily. When you look at price tags, term insurance looks better at first glance. You can get a higher death benefit with a lower premium. You also get a policy with an expiration date. If your policy expires before you do, the next term you buy might not be as good a value. It’s even possible that when the next term comes up you could be considered “uninsurable.”
Whole life policies can last a lifetime and cover you no matter what your latest health or occupation, so having that peace of mind is often worth writing a bigger check. Whether you die tomorrow or live to be 100, your coverage will not end as long as you keep paying the premiums. Whole life insurance is designed to build cash value over time. The Gerber Life Whole Life Insurance Policy1, for example, builds cash value over time, as long as premiums are paid. This means that if an emergency were to occur, you or your loved ones could borrow* against the available cash value as an immediate source of funds.
5. I’m too young for life insurance.
No one is too young for life insurance. There are life insurance policies to cover people of all ages, including infants. Generally, the younger a person is, the lower the insurance premium rates. A major health issue might bring the cost up. Despite life expectancy ages, no one can truly “expect” someone’s life to last for any specified amount of time. A basic question to ask yourself: “If so-and-so family member should die either soon or later, what would be the financial impact on the survivors?”
When younger or middle-aged adults die, there often are children still growing up and outstanding debt for major purchases, such as a home and a car. When a young child dies, will funds be available to pay for funeral and burial expenses? A good life insurance policy can help the beneficiaries take care of such needs with less stress and out-of-pocket expenses.
1 Policy Form Series SWLP-13
Policy Form ICC13-SWLP
Policy Form Series HWLP-13, Policy Form ICC13-HWLP
*Policy loan interest rate is 8%