Top 10 life insurance myths, debunked
Buying most kinds of insurance is straightforward. You research your insurance company options to see what’s out there. You gather insurance quotes. And then you get car insurance if you have a car, homeowners insurance if you have a home, and renters insurance if you rent. So, it makes sense that you would have life insurance if you have a life. And yet, so many people put off buying life insurance – often because they’ve heard things about it that just aren’t true.
Whether you’re worried it will cost too much or think life insurance isn’t necessary yet, we’re here to set the facts straight. Here are some of the most common myths and misperceptions about life insurance.
Table of contents
- Myth #1: Life insurance is too expensive
- Myth #2: I’m single, so I don’t need to think about life insurance right now
- Myth #3: You can’t get covered if you’re pregnant
- Myth #4: You shouldn’t buy life insurance if you have debt
- Myth #5: Life insurance is not taxable
- Myth #6: You don’t need it if you have a group policy through work
- Myth #7: You can’t get covered if you have a pre-existing condition
- Myth #8: Only people with kids need life insurance
- Myth #9: My family will be fine financially without life insurance
- Myth #10: I’m too old to get covered
- Still think life insurance is confusing?
Myth #1: Life insurance is too expensive
Think you can’t afford life insurance? There’s a good chance you’re overestimating the price. A LIMRA study found that half of consumers think life insurance is three times more expensive than it actually is, and millennials overestimate the price by as much as five times. In reality, a night out at the movies or a round of mini golf costs more than the monthly premium for a typical policy for a healthy 30-year-old. The other hard fact is that the cost of life insurance increases with age, typically by between 8 and 10 percent a year. That means if you’re quoted $40 a month for life insurance coverage when you’re 38, you can expect that quote to rise to $44 a month when you’re 39 and $48 per month when you’re 40. If you lock in that $40 a month rate now, though, you can avoid the price hikes that come with age.
Myth #2: I’m single, so I don’t need to think about life insurance right now
There’s no question that younger is better when talking about life insurance. Even if you don’t have kids yet, there still may be others depending on you. If you have student loans or credit card debt, your family would be responsible for them if you died. That’s exactly why life insurance should be a priority, even when you’re still young. Beyond locking in lower rates, getting a policy now also means you’re guaranteed to have coverage later, even if you develop a medical condition. In fact, once your term life insurance policy expires, many insurance carriers will let you continue to renew the policy each year without a health exam.
If you’re just starting out, you can learn more about purchasing life insurance here.
Myth #3: You can’t get covered if you’re pregnant
Life insurance is all about protecting your family. As long as there aren’t any major complications with your pregnancy or past pregnancies, you’ll likely be in good shape. Many carriers will even use your pre-pregnancy weight to calculate your quote so you can get a lower rate. If you’re facing health issues, such as gestational diabetes, you may still be able to get covered, but at a slightly higher rate. It’s all the more reason to secure a policy before pregnancy becomes a factor. Again, rates are almost always lower when you’re younger. Speaking of being younger…
Myth #4: You shouldn’t buy life insurance if you have debt
This is one of the biggest life insurance myths out there. Having debt is all the more reason to buy a life insurance policy. One of the advantages of being insured is that the death benefit allows your family to pay down any student loans or credit card debt you left behind. Without a policy in place, your loved ones could have to deal with a big financial burden on top of a great emotional loss.
Myth #5: Life insurance is not taxable
This isn’t a myth. This is 100 percent true. The death benefit payout in your policy is not considered inheritance. It is meant exclusively to help and protect your family, and even the Tax Man doesn’t want to get in the way of that. Both term life and whole life policies have tax breaks that are beneficial. You can find more FAQs about life insurance and taxes on our blog.
Myth #6: You don’t need it if you have a group policy through work
This might have been more accurate 40 or 50 years ago, when people stayed at the same job for, well, 40 or 50 years. Since your company owns the policy, though, you typically lose your life insurance if you leave that company. Employers are also scaling back on this benefit, with only 48 percent of them offering group life insurance in 2017, down 23 percent from 2006. For those that do offer coverage, the amount is often smaller than the amount most financial experts recommend, which is five to seven times your income. Having your own life insurance policy from a reputable life insurance company ensures you’re always covered, even if you change jobs.
Myth #7: You can’t get covered if you have a pre-existing condition
This misperception is perhaps the most reasonable of all, but it is still a misperception. Say you have a chronic condition like diabetes. As long as you’re eating right, managing your medications, and generally taking care of yourself, you likely won’t have a problem. You may not get the lowest rate, but it won’t prevent you from getting covered. If your condition is something more serious, like cancer or a stroke, you’ll typically have to wait two years before coverage kicks in. If you’re concerned about your health being a factor, request some insurance quotes from life insurance companies and check out your options for getting life insurance with no medical exam.
Myth #8: Only people with kids need life insurance
Lots of people think there’s no need for life insurance because there’s no baby in the picture yet. If this sounds like you, it might be time to take another look at coverage. People buy policies from life insurance companies for a number of reasons, like protecting their spouse from financial hardship. In fact, about half of people say that they would face some financial challenges within a mere six months if the family’s breadwinner died. Many of these people (35%) would feel financial hardship within just one month.
Still others choose to purchase whole life or term life policies to protect their loved ones from debt. The average millennial borrower owes about $33,000 in student debt today, making it important to have a plan if you’re suddenly unable to pay it. In some cases, your partner or family could be on the hook for student loans or other big expenses, like credit card debt. If you have co-signed loans, the co-signer would actually be responsible for the entire loan if you passed away.
Finally, if you’re planning on having kids, purchasing life insurance early on can also help you lock in lower rates, especially if you know you’ll need coverage later.
Myth #9: My family will be fine financially without life insurance
Think you have enough in your savings account if the worst happens? You might actually need to plan for more than you think. The typical rule of thumb is that you need seven to 10 times your income in life insurance, enough to cover both current and expected future costs. It’s pretty difficult for most people to stash away that much cash on their own. That helps explain why nine in 10 people think that a family’s breadwinner needs to purchase life insurance. Not sure what your ideal coverage amount is? Start by calculating how much term life insurance you might need here.
Myth #10: I’m too old to get covered
Just like the young myth, many people believe that they’re past their prime for getting covered by life insurance. But even as you get older, you still have plenty of options. In fact, most life insurance carriers allow you to apply into your 60s or even beyond for term life coverage. These policies usually start at about $100,000, enabling you to buy enough coverage to protect your partner and loved ones after you’re gone. If you’re simply looking for a final expense insurance policy to help your family out with costs for funeral services, burial, medical bills, and other expenses, you can qualify for these policies up to the age of 85.
Still think life insurance is confusing?
That’s what we’re here for. Our goal is to make it simple to find the right policy. So reach out, get those questions answered, and feel more confident about protecting your family.
At eFinancial, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed and updated regularly to ensure the information is as relevant as possible.