#1: I’m better off investing my money than buying life insurance.
When you rely solely on investments in the early years of your life, you’re taking a big risk, especially if you have dependents. If you die without life insurance coverage for your family, there may be no other means for your family to earn income after your death once your assets are exhausted. Not to mention, many families and breadwinners I consult with about life insurance are interested in their families being able to maintain the standard of living they were used to prior to the death of a breadwinner. If you depend on your family depleting your assets to replace the income you provided them, they may one day need additional income beyond what your assets can provide.
#2: I’m single with no dependents, so I don’t need coverage.
Regardless of your marital status or the number of dependents you have, even a single person needs at least enough life insurance coverage to pay off any personal debt left behind, as well as medical and funeral costs (average funeral costs range from $ 5,000 and $10,000 depending on location and services needed). If you remain uninsured, you can leave a legacy of unpaid debts and expenses for your family to deal with. Additionally, life insurance can give single people the option of leaving a legacy to a preferred charity, religious affiliation, or other cause.
#3: Double my salary is all the coverage I need.
Think of it this way. Let’s say you were the sole breadwinner in your family and had one or two 10-year-old children and earn $100,000 per year. How long do you think your family could live on $200,000 after your death? Considering that your family will have to pay a mortgage, food and clothing to buy, and a car and a house to maintain, that money will not last long, especially if the family also has debts to pay, in addition to the funeral. and medical costs incurred as a result of your death. An industry rule of thumb for how much coverage a breadwinner needs is {10 x your annual income}. This would allow your family enough income to cover themselves for at least 10 years. Consider the college tuition you would like your children to have and even more coverage would be needed to leave them an educational fund. A cash flow analysis is usually necessary to determine the actual amount of life insurance coverage that should be purchased to adequately protect your family.
#4: I have life insurance coverage at work, it is enough.
This depends on your marital and family status. If you’re single, taking out term life insurance is probably enough. However, if you are married and have dependents or potentially need coverage to pay estate taxes upon his death, then simply having employer-sponsored term life coverage is not enough. Another thing to consider is that if you ever leave your job, most employer-sponsored life coverage is non-portable. If his next job he picks up doesn’t provide life coverage, he’ll need an individual property policy. The problem then is how old are you now? He has been relying on life insurance coverage from work and is now 10 years older. The older we get, the more expensive life insurance becomes, plus the older we get, the more likely our health will decline, which means our insurability will also decline, resulting in rate increases. Take advantage of an individually owned life insurance policy while you’re still young and healthy.
#5: Always invest in the return of premium (ROP) rider in your policy.
This is absolutely false. It depends on your preferences and budget. If it falls within your or your family’s financial budget, then it should be considered. A cash flow analysis will reveal whether you could benefit from investing the rider amount elsewhere instead of including it in the policy.
#6: Only breadwinners need life insurance coverage.
This is absolutely untrue, especially these days. It has been said that the estimated value of a housewife’s annual income is valued at approximately $100,000 per year. A housewife has taken on the role of babysitter/babysitter, house cleaner, cook, driver, wife, and sometimes teacher. A breadwinner would be in dire straits if she knew that the housewife was no longer there to take care of the house and children while she works. However, if the homemaker has adequate life insurance coverage and dies, then the breadwinner may be able to pay for daycare services to care for the children while they work and a domestic helper to clean the house while they care for the children. children. This income would be a lifeline for a single breadwinner with dependents.
#7: Variable universal life policies are superior to direct universal life policies because of their long-term growth potential.
Because variable universal life (VUL) policies have non-guaranteed interest rates, there is a chance that a VUL policy will underperform the guaranteed interest rate of a universal life (UL) policy. However, on the other hand, because the VUL policy fluctuates with the market, it also has the potential to accumulate more cash value than a traditional UL policy by achieving a higher interest rate than the guaranteed interest of a UL policy.
#8: Buy term insurance and invest the difference.
it depends. If you don’t have many assets and don’t need permanent life insurance, then buy term coverage. HOWEVER… if you need permanent life insurance coverage, for example, to cover your estate taxes or leave income to a child with special needs, then term insurance is not enough.
#9: I absolutely must have life insurance at any cost.
it depends. If you have no dependents or debt and have accumulated considerable assets, you probably don’t need life insurance coverage. The concern in that case would be any medical and funeral costs that he may leave for his family to take care of. Again, though, if you’ve built up sizable assets, you can use them to take care of those final expenses.
#10: The cost of my premiums is tax deductible.
Unfortunately, in most cases this is true. Personal life insurance premiums are NEVER deductible. However, if you are an employer and purchase it as a benefit for your employees, the premiums are deductible. However, some of the premiums may be taxable at the employee level.
In conclusion, the misconceptions I have listed above regarding life insurance are many of the questions that the public and many of my clients tend to ask. Simply put, unless you are single with no dependents or have accumulated many assets, the need for life insurance coverage is very real and very necessary for the financial well-being of your family and dependents.
