Article - Common Life Insurance Myths
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Life insurance is not an easy product. Term life insurance policies too have many elements that must be reasoned carefully in order to arrive at the proper type and amount of insurance coverage. But the technical features of life insurance are far less difficult for most people to deal with than trying to get a grip on how much coverage they need and why.
Consumers typically buy term life insurance to provide death benefit protection for a specific period of time. Premiums for term coverage are usually initially lower than other types of life insurance because the policy only provides a death benefit for a defined period.
"Many Indians consider term life insurance to be an unnecessary expense. However, it is an important component of your investment portfolio."
Following are the top 7 misconceptions surrounding life insurance and the realities that they distort.
Myth #1: I'm Single and Don't Have Dependants, so I Don't Need Insurance coverage
Every person needs at least enough life insurance to cover the costs of personal debts and medical bills. If you are uninsured, you may leave a gift of unpaid expenses for your family to deal with.
Myth #2: My Life Insurance Coverage should Only Be Twice My Annual Salary
The amount of life insurance each one needs depends on one's specific situation. In addition to medical bills, you may need to pay off loans such as your mortgage and render for your family for several years to come. Many companies do provide life insurance for their employees, which is usually twice your annual salary. However, this might not be enough for your family's future should you die before retirement. Consider additional life cover.
Myth #3: My Term Life Insurance Coverage at Work Is Sufficient
If you have a spouse or other dependants, or know that you will need coverage upon your death to pay for debts, then additional coverage may be necessary if the term Insurance policy provided by your employer does not meet the needs of the policyholder.
Myth #4: I MUST Have Life Insurance at Any Cost
In most cases, yes the above is true. However, if you have sizeable assets and no debt or dependants may not require Life Insurance at all!
Myth #5: I Should ALWAYS Buy Term and Invest the Difference
Not necessarily. There are clear-cut differences between term and permanent life insurance, and the cost of term life coverage can become high in later years. Therefore, those who know for certain that they must be covered at death should consider permanent coverage.
Myth #6: Only Breadwinners Need Life Insurance Coverage
Regrettably, when it comes to life insurance, coverage for stay at home spouses is often neglected. Although your stay-at-home spouse may not earn an income, think of the services he or she in all probability provides for free: child care, meal preparation, housekeeping and more. With that spouse gone, life suddenly gets a lot more expensive.
Myth #7: I'm Better off Investing My Money Than Buying Life Insurance of Any Kind
Investments aims to create or preserve wealth in the long term; life insurance is a safety net against unpredicted events. But you take a big chance when you depend solely on your investments in the early years of your life, especially if you have dependants. If you die without coverage for them, there may be no other means of provision after the depletion of your current assets.
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