The following is a guest post from insurance expert Nicole Rubin of Insureabilities, a website focused on providing “ up-to-date information on the state of health insurance in the U.S.”
The purpose of financial planning is twofold: You want to invest wisely to grow wealth, and you also want to preserve your wealth for the future. Most of us have an idea that life insurance should be part of our financial plans, but with all the myths you hear about life insurance, many people decide to put it off. We’re here to set the record straight, so you know exactly what role life insurance should play for you – and the best way to protect your family.
Myth: Life Insurance is too Expensive
Perhaps the top misconception people have about life insurance is that they can’t afford it. To better understand how life insurance impacts your budget, you have to start with how the costs are determined. To start with, there are two main types of life insurance: term and whole. With term life insurance, the policy you choose is based on the amount of time that it lasts. For example, if you have a mortgage and are raising children, a 20- or 30-year term would be a good choice to have; if you were to pass unexpectedly within this time frame, your family would be given a payout to help cover financial responsibilities.
Whole life insurance, on the other hand, never expires, but it also has higher premiums. In most situations, term life insurance is all you need to make sure your family is protected, and you can purchase these policies at very affordable rates. Your age and health impact the cost of life insurance, too, so individuals who are young and healthy are typically eligible for lower premiums.
Myth: Young People Don’t Need Life Insurance
It’s common for young professionals to think that life insurance is only necessary for older people with major obligations. In fact, it’s smart to purchase any life insurance you might need while you’re young rather than waiting. Investopedia explains that term life insurance rates are determined based on your age, yet the rate is set when you purchase the policy. So, you can purchase a policy at a low rate when you’re young, and your premiums stay the same each year. But you would end up paying a higher rate if you were to wait and purchase that same policy a few years down the road.
Myth: Only the Super Rich Get Life Insurance
Another common myth is that only the super rich need life insurance. The truth is that regular people also need adequate coverage, and yet, according to Fox Business, many middle income Americans only have enough life insurance to cover the bare minimum of a family’s expenses. You don’t have to be ultra-rich to want the peace of mind that your family could maintain their current standard of living, without worrying about finances, if you were no longer around.
Along the same lines, many people assume that only the breadwinner needs life insurance. If one partner in your home is a stay-at-home parent, consider the economic impact of the work they do. Would you need to pay for childcare or a housekeeper? Even if one partner earns significantly less, your family is used to having that income, and the loss would have an impact on your lives.
Myth: Employer Group Insurance is All You Need
If your employer offers group life insurance at no cost to you, there’s no reason not to accept it, but keep in mind that it won’t include your family in the coverage. The amount of coverage group insurance provides is based on your salary. Not to mention, you would most likely lose this coverage if you changed jobs, which would leave you at square one.
Life insurance has a bad reputation for being overly complicated, and these myths play into that. With these myths busted, the next step is to make sure you have the right amount of coverage for your particular situation. Life insurance is the financial plan we hope we’ll never need, but it’s also one you don’t want to risk going without.
Nicole Rubin worked in the health insurance industry for years, spending a majority of her time fielding questions from people concerning their coverage and medical bills. Over the course of her career, Nicole learned a lot about the ins and outs of the healthcare system from the perspective of both customers and insurance companies. She is using that knowledge to write a book about the current state of health insurance, as well as provide updated info about the subject on her site, Insureabilities.