September is Life Insurance Awareness Month, which makes this the perfect time to reflect upon your family’s financial goals and determine if you have enough protection under your current life insurance policy or if you should look into purchasing a new policy. If you have yet to secure a life insurance policy, it’s helpful to understand that doing so can provide a safety net for your family if you were to unexpectedly pass away, making this an important safeguard to have in your financial portfolio.
Life insurance can be a tricky topic to grasp because there is a lot of conflicting information available, resulting in misconceptions that either prevent individuals from applying for life insurance in general or leave them underinsured. Here are a few of the most common myths surrounding life insurance debunked to help you determine if you have the best coverage for your personal needs.
Key Takeaways:
- Life insurance isn’t as costly as it seems. Affordable options like term life insurance provide essential protection.
- Employer-provided life insurance may not offer enough coverage. Supplemental policies can bridge this gap.
- Pre-existing conditions don’t make coverage impossible. Many options are available, even for high-risk applicants.
- Stay-at-home parents also benefit from coverage. Life insurance can cover the valuable, unpaid work they do.
Myth #1: Life Insurance is Expensive
While obtaining a life insurance policy is an added cost to your budget each month, depending on your age and health, purchasing a policy might not be as expensive as you thought. The two main types of life insurance are whole life and term life policies. Whole life insurance is known to be more expensive each month because in addition to providing a lost income replacement, it can be used as an investment as well.
If you are budget-conscious but still want to protect your family from an unexpected event, term life insurance is most likely your best option. The cost of term life insurance depends on a variety of factors such as the amount of coverage you need, the amount of time you want a policy for, health status and age. This type of policy is usually more affordable for most people, while still providing income protection if you were to unexpectedly pass away.
Myth #2: Employer-Provided Policies Offer Enough Coverage
Group life insurance coverage is offered by some companies through their benefits package. If your company has this benefit, you are either able to purchase a life insurance policy through your employer at a discounted rate or the plan is free. While this is a great benefit to have through your employer, keep in mind that a private supplemental policy might be necessary to provide adequate coverage for your financial needs.
Generally, if your employer-sponsored coverage does not equate to 10 times your annual salary, you would need additional coverage. Also remember that most of the time, group life insurance coverage is nontransferable so if you were to find a new job, you would be left without any coverage.
Myth #3: Individuals Who Have Pre-existing Conditions Can’t Obtain Coverage
Even though having a preexisting condition can sometimes make obtaining a policy a bit more challenging, that doesn’t mean that finding coverage is completely impossible. There are many options available and certain companies have different underwriting regulations that might support your personal situation better than other companies. This is why it makes sense to take the time to look into various companies or consider using an online broker who can sort through the best providers for your personal needs.
Additionally, if you are concerned about taking the medical exam during the current pandemic, there are temporary policies to provide you with coverage between the time you apply and actually get a medical exam. If you are still ineligible for a term life insurance policy after exploring different options, you can still find coverage through a guaranteed life insurance policy. This would be less comprehensive and more costly but still allow for some level of protection for your family.
Myth #4: Stay-at-home Parents Don’t Need a Policy
If you are a stay-at-home parent, you most likely wear many hats, between general childcare duties, laundry, pick up and drop off at various activities, cleaning and making sure everyone is fed, it can sometimes seem like a thankless job. Even though you aren’t earning a salary, remember that there is a monetary value that can be put on your time. The cost of childcare is not cheap, which might have been one of the reasons you decided to become a stay-at-home parent. A life insurance policy wouldn’t cover your lost income, instead it would cover the cost of the responsibilities you have as a homemaker.
Myth #5: Young and Healthy Individuals Don’t Need to Purchase a Policy
As opposed to what many believe, purchasing life insurance coverage when you are younger and in better health is oftentimes the most optimal time to secure a policy. For example, if you are considering getting married or starting a family within the next five years, it could be helpful to look into policy options now because you can lock in a lower rate sooner rather than later.
This is due to the fact that when you apply for life insurance, you will be asked a series of questions followed by a medical exam to determine your health history so that the underwriters can determine your rate based on the risk you pose to the company. In general, when you are younger, you have less health concerns meaning you are at a lower risk of death or illness, which in turn results in a lower rate that doesn’t change as you age.
Because there are so many options available when obtaining life insurance, there can sometimes be misinformation when it comes to selecting the right policy, leaving individuals uninsured entirely or underinsured.