Life insurance provides amazing benefits. With a policy in place, your beneficiaries can obtain funds to pay off your debts or plan your funeral. This is a sensitive subject and many people avoid the topic. But the more you know about life insurance, the better you can protect your family. If unfamiliar with this type of insurance, you’re likely to believe many common misconceptions. Maybe you’ve heard that life insurance isn’t important and it’s better to save your money. Or perhaps you believe that you only need enough coverage to replace your income for a year. The rules regarding life insurance aren’t simple.
Before buying a policy, consider four common myths. Knowing the truth about life insurance can help you purchase the right amount of coverage.
Myth #1: My Employer-Sponsored Life Insurance Policy Is Enough
If a company worker dies, some employers pay a death benefit to the family. The actual amount varies by company, however, many employer life insurance policies only pay a few thousand dollars. This may be enough to pay for the funeral and burial, but nothing more. Instead of relying on cash from your employer, purchase an additional policy to cover all your final financial expenses.
Myth #2: I’m Not Married and I Have No Children, I Can Skip Life Insurance
This is a common belief among single people with no dependents. But while you may not have a spouse and children, you likely have debts. These might include a mortgage payment, a student loan and credit card payments. These debts don’t magically disappear after you die, unless you have payment protection insurance which pays off your balances. While your family didn’t incur these debts, your creditors may pressure them to pay your final expenses. In the end, it’s always best to have a policy in place to shield your family from this extra headache.
Myth #3: I Only Need to Replace My Income for One or Two Year
If you’re married or have children, you need a policy that will replace your income for years to come. A larger policy is more expensive, but it can provide your family with the means to live comfortably in a safe place. The extra money will not only pay off your debt, but your surviving spouse or a guardian can put some of the money toward your children’s future.
Myth #4: Only the Family Head Needs Life Insurance
If one spouse stays home or only works part-time, some families believe that only the breadwinner needs life insurance. This couldn’t be farther from the truth. The untimely death of a spouse or parent turns a household upside down. Overcoming the initial grieving process can take weeks or months. Having a life insurance policy in place for a non-working spouse makes it financially possible for the surviving spouse to take a leave of absence from work and grieve. It also makes good financial sense for spouses to obtain a policy for their children. Thus, they can take a few weeks off from work and not stress about bills.
