Purchasing life insurance is an emotional decision, which is why the tendency to commit mistakes arises. Due to multiple companies’ availability and hundreds of options to choose from, it is typical to feel engulfed in skepticism. If the thought of purchasing life insurance overwhelms you, then this article is for you. It will provide you clarity on some of the fundamentals of life insurance planning. Since confusion is the obstacle we are tackling today, here are the five common life insurance misconceptions to avoid:
1. Group insurance is all I need
It is important to understand that group life insurance is taken by a single entity such as a company, society, etc. It provides coverage to all the beneficiaries that fall under the same. You must be aware of the two major drawbacks of group life insurance before settling down on it. First, you are not the only person being covered; hence it will never be enough coverage to protect your family in the event of your death. Besides, group coverage will only last as long as you are employed; and in today’s world, having job security is rarely certain. Although most group coverages offer an option to convert your group life insurance into personal insurance after leaving your place of employment, it could be a juvenile attempt because it will be adding new expenses to your family budget, and at old ages, purchasing new life insurance can be costly.
If you still want to invest in group life insurance, it is highly advisable to seek professional guidance. A professional insurance advisor can help you illustrate how the group and personal insurance can be used simultaneously to ensure that your family’s standard of living and plans for the future are fully protected under any circumstance. To gain more information on what to expect when putting together a comprehensive insurance plan, watch this Smart Talk video.
2. I have plenty of coverage
There are higher possibilities that you could misinterpret the amount of money needed to provide your family with a financial security if an unforeseen circumstance occurs. Not purchasing enough life insurance is a common problem that many people face.
Many factors could jeopardize your judgment, such as inflation, natural calamities, imperceptible loss, etc. Anticipating that you are more than covered could backfire at any time.
Although there are many rules and principles that people commonly use to determine how much coverage your family needs, such as multiplying your income by ten. It may seem exciting, but they are often inaccurate. Take a look at our previous article – Life Insurance for Financial Protection. It will provide you a basic explanation of how much coverage your family may need.
3. Term insurance is the least expensive coverage
Term insurance is top-rated among young people as they are the simplest, and also the premiums are relatively low. What it does is that it protects you from the financial impact of death for a particular period. This type of insurance is preferred for parents who want to support their children financially for 5, 10, or 20 years if they pass away while the children are still dependent on them. That being said, even though term insurance comes with many benefits such as temporary insurance protection, easily renewable, low premiums, etc., these premiums could escalate exponentially once the selected term is completed.
Term insurance still has its place in many people’s lives. If you only wish to be protected for a while, then this could be beneficial, but if you are looking for long-term coverage, then purchasing term insurance can cost you more than initially expected and is not economically efficient.
4. I’m already have a Policy, I no longer need to worry
Another misconception clogging most people’s thoughts is thinking that they have a policy in place and nothing else is left to be done.
Buying life insurance is one of the most important purchase decisions you will ever make in your life. Once you own it, it’s crucial to revisit your policy and contract every three years to ensure that it still aligns with your current lifestyle and needs.
For instance, if your beneficiary was your spouse who has died or you no longer stay together, it is critical to change your designated beneficiary. You want your coverage benefits to be handed down to the appropriate person. Additionally, your needs will certainly change over time. That requires you to review and verify whether or not the policy you purchased still fits with your current and anticipated future needs. Fortunately for you, there is another policy for this exact reason. We recommend you have an adaptable life insurance policy that can adjust to you and your ever-changing lifestyle.
To gain a better understanding of adaptable life insurance options, check out our EquiBuild page article.
5. I Have Plenty of Time to Buy Life Insurance
Time is an underrated measurement of your life. There is no way to foresee what the future holds. Assuming that there is plenty of time left, it could be devastating. To put things into perspective, there exists a strong relationship between your age, health, lifestyle, and your insurance premium rates. Waiting too long to purchase life insurance can be an expensive mistake. It is strongly suggested to begin when you are still young and healthy because the younger and healthier you are, the lower your premiums will be regardless of the policy you choose (both term and permanent insurance).
In this Smart Talk video, you’ll see some of the insurance needs you’re likely to have throughout your life span. It also explains the different types of life insurance policies available for you. It highlights the importance of building an affordable and flexible insurance plan early on that will last through all of your life’s adventures.