Debunking Life Insurance Myths: What You Need to Know

Shawn Plummer

CEO, The Annuity Expert

Life insurance is essential to financial planning, but many people hesitate to purchase it due to misconceptions and myths. These misunderstandings can prevent individuals from protecting their families and assets, resulting in significant financial losses. Therefore, it is critical to understand the truth behind these myths and make informed decisions about life insurance. In this guide, we will debunk some of the most common life insurance myths and provide readers with the information they need to make informed decisions.

Myth – Life insurance is only for older people

One of the most prevalent life insurance myths is that it is only necessary for older people and that social security will cover their needs. This misconception stems from the idea that younger people are less likely to die and, therefore, do not need life insurance. However, this is far from the truth. Younger people are more likely to encounter unforeseen circumstances such as accidents, illnesses, and unexpected deaths. Therefore, individuals of all ages must purchase life insurance to ensure financial protection for their loved ones.

Why younger individuals need life insurance

Younger people may not have dependents or significant assets that require protection, but that does not mean they should not consider life insurance. For example, a young person who has just graduated from college may have student loan debt that could be covered by life insurance if they pass away unexpectedly. Additionally, life insurance premiums are generally lower for younger people, making it an affordable option for those just starting their careers.

Benefits of purchasing life insurance at a Younger age

Purchasing life insurance at a younger age provides individuals with long-term benefits. For example, a young person who purchases a 30-year term life insurance policy at age 25 will pay lower premiums than someone who purchases the same policy at age 35. Additionally, younger individuals are generally healthier, making it easier to qualify for better rates.

Common Misconceptions About Life Insurance

Myth – Life insurance is too expensive

Another common myth about life insurance is that it is too expensive, particularly for lower-income individuals. However, life insurance policies are available at various prices and coverage levels, making them accessible for individuals of all income levels.

Types of life insurance policies

There are two central life insurance policies: term life insurance and permanent life insurance. Term life insurance policies provide coverage for a specified period, while permanent life insurance policies cover the policyholder’s lifetime. Term life insurance policies are generally less expensive than permanent ones, making them a popular choice for individuals on a budget.

How to save money on life insurance

There are several ways to save money on life insurance premiums. For example, purchasing a policy at a younger age and maintaining good health can help lower premiums. Additionally, shopping around for the best rates and comparing policies from multiple insurance providers can also help save money.

Myth – Employer-provided life insurance is sufficient

Many individuals believe that the life insurance provided by their employer is sufficient and do not need to purchase additional coverage. However, while employer-provided life insurance is a valuable benefit, it may not provide enough coverage to protect dependents or assets adequately.

The limitations of employer-provided life insurance

Employer-provided life insurance policies typically provide coverage of one to two times the employee’s annual salary. While this may seem like a significant amount of coverage, it may not be enough to cover all expenses and provide for dependents if the employee passes away unexpectedly.

The benefits of purchasing additional life insurance

Purchasing additional life insurance can give individuals the peace of mind that their loved ones will be financially protected in the event of their unexpected death. In addition, individuals can customize their coverage to fit their needs, including protecting their assets, paying off debts, and providing for dependents’ future expenses.

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Myth – Only breadwinners need life insurance

Many believe that life insurance is only necessary for the primary breadwinner in the family. However, stay-at-home parents or non-working spouses also play a crucial role in the family and require life insurance coverage.

The value of stay-at-home parents

Stay-at-home parents or non-working spouses provide critical services, such as childcare, household maintenance, and managing finances, that would require significant expenses to replace if they passed away unexpectedly. Therefore, they also require life insurance coverage.

It is choosing the right coverage for non-breadwinners

Non-breadwinners require life insurance coverage to cover their family’s future expenses and protect their assets. For example, a stay-at-home parent may require enough coverage to pay for childcare and other household expenses if they pass away.

Helpful Tip: To create a comprehensive estate plan, including a living trust and last will and testament, without breaking the bank? We suggest:

Myths About Life Insurance

Next Steps

Life insurance is an essential component of financial planning that requires careful consideration and informed decision-making. By understanding and debunking common life insurance myths, individuals can make informed decisions about purchasing coverage that will provide their loved ones with financial protection in the event of their unexpected death. Remember, life insurance is not just for the elderly or primary breadwinners but for individuals of all ages and income levels who want to protect their loved ones.

Need Help Getting Life Insurance Coverage?

If you have a preexisting medical condition and want to buy life insurance, you will need help from an expert. This person can help ensure you get coverage so you don’t get declined.

Warning: Applying for life insurance without a medical exam can be risky. If you have declined coverage, it could take at least two years to get any life insurance.

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Frequently Asked Questions

What is the major problem with life insurance?

Regarding life insurance, the cost is often a significant deterrent… But Nupur Gambhir, featured in Bloomberg News, Forbes Advisor, and more, will tell you that this type of coverage can be surprisingly attainable. From CNET and Fortune to Slate and The Financial Gym–Nupur’s expertise in end-of-life planning services like Cake has made her an authority on finding affordable rates without compromising quality.

Why do people not buy life insurance?

The price tag attached to life insurance is often the deterrent for many who want coverage but overestimate how much it costs. For those underinsured households, they don’t lack in desire or need; instead, they are deterred by a misconception of cost.

Why do people not invest in life insurance?

There are several reasons someone may not be in the correct position to purchase life insurance, such as an absence of beneficiaries or insufficient funds for monthly premiums. However, even if you don’t have dependents who need financial assistance after your passing, it is still wise to consider investing in life insurance.

What are the five disadvantages of insurance?

Insurance may come with various drawbacks that should be considered before taking out an insurance policy. These include complex terms and conditions; the potential for lengthy, expensive legal procedures; fraud risks associated with some providers; not being accessible to everyone due to high costs or other restrictions; potential criminal activity linked to specific policies’ coverage options and eligibility requirements; increased cost of doing business as premiums rise over time, in addition to additional fees often associated with different plans; and possible gaps between what was promised by the insurer versus what they legally have the right (or responsibility)to provide.

What is the most common reason for owning life insurance?

Life insurance provides unparalleled financial security, allowing you to pay off debts, living expenses, and even medical or funeral costs without worrying. In addition, it’s the most reliable way to protect yourself and your loved ones from any unforeseen events.

What are the three main reasons why many Americans get life insurance?

Americans often purchase life insurance for various reasons, including to secure financial stability during their retirement years, as the cost of coverage typically increases with age. Life insurance can also provide cash resources when there is outstanding debt from mortgages and other expenses that need to be paid off in the event of death or disability. Finally, life insurance provides families with peace of mind knowing they are cared for in case something unexpected arises.

*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost to you if you purchase a policy. It helps us keep the lights on!

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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