There are some lesser-known life insurance facts that may surprise you. And if you’re feeling extra curious about life insurance these days, you’re in good company. Life insurance, and the decision to take out a policy, are something many people consider so that their loved ones will be protected in the event of their death. The industry can be confusing to many, and there may be some things about life insurance that you didn’t know.
Is there something my life insurance agent is not telling me?
Despite all the perks life insurance offers, there are a number of misconceptions and myths regarding a life insurance policy. One must educate oneself about the truth and avoid any false information. Knowing the facts can help you make a wise decision and extract the maximum benefits from a life insurance plan.
This article aims to completely put an end to some of the common myths about life insurance plans that are circulating. Get information as you read more about these myths and facts.
Well, life insurance can anticipate many financial problems and losses resulting from death to ensure the financial continuity of the family, the education of the children, their health, and the usefulness of the lives of the family members left behind. By getting life insurance, you can have peace of mind that family life will still be guaranteed.
What is the essence of having a life insurance?
Having life insurance does not necessarily mean expecting bad things to happen, but rather an expectation so that there will be no adverse effects on your family in the future. The reason is that no one can know when death will come, but we can still anticipate all the bad possibilities that happen next. This is why life insurance is one of the important financial plans that everyone should have, especially for those of you who are active and productive in a high-risk environment.
Surprisingly, there are quite a number of people who do not realize or know the benefits of life insurance because they do not have any information about it. Instead of getting the facts about insurance right, they have been filled with many false myths.
Are you one of those people who ignore the importance of life insurance? Here are some insurance myths and facts that can help you understand how important it is to get life insurance:
What are the life insurance facts you didn’t know existed you never knew existed?
1. You need life insurance even if you are young and healthy
It is true that you may not need life insurance if you are young, single and have no dependents. But if there are people who depend on your income, then the life policy is worth considering. Should a partner die sooner than expected, the last thing you’ll need is any financial stress related to how to pay the mortgage or bills.
2. The younger you are, the cheaper life insurance gets for you
If you want coverage for a specified return over a specified number of years (known as “level” life insurance), the monthly cost will not increase during the life of the policy. So if you get 25 years of coverage, paying £150,000, the premiums will stay at an average cost of £10.54 a month for someone aged 18-29 during that time.
Keep in mind that life insurance only pays in the event of your death. It does not cover serious illness or injury. If you want to be covered for this, income protection or critical illness insurance is worth considering. Both can be purchased as a standalone cover, or added to a life insurance policy.
3. Life insurance is not as expensive as you think
Many people think that life insurance is too expensive. The thought of paying life insurance premiums makes them embarrassing. But it turns out that the public tends to overestimate the cost of life insurance. In fact, many people think that life insurance is three times its actual price. As a result, some people end up not buying life insurance at all.
Life insurance may sound expensive, but if you look at the big picture, you will quickly change your mind. What pays a few hundred dollars a year when your dependents receive hundreds of thousands of dollars in return. In any case, not having life insurance can quickly become a costly mistake that could affect the future of your dependents if you don’t have any other form of financial protection. Without life insurance and any significant form of liquid savings, they may have to pay for your funeral using their own savings in addition to any unpaid mortgages or loans. One thing is for sure, life insurance is more affordable than you thought.
4. Life insurance is just as important as savings and redemptions in your financial planning.
You know that creating a nest egg for emergencies and setting aside money for retirement is essential to your family’s financial security. But what would your family do if they suddenly couldn’t count on your income? As a general rule, if anyone is financially dependent on you, life insurance should be part of your financial plan. According to a 2020 industry study, nearly two out of three people said they purchased life insurance to replace their wages or income if they died. Your family can use the money from the policy to buy daily necessities, pay off a mortgage, cover debt and end-of-life expenses, or save for a child’s education.
5. It is a good idea to name more than one beneficiary.
When you buy life insurance, you name the beneficiary – the person who receives a death benefit if the unthinkable happens. But what you may not realize is that naming just one beneficiary is not enough. What if a beneficiary passes in front of you and you don’t select a new beneficiary? Your policy will still be paid, but it will go to your property and it will take a long time for your family to have access to the money instead of the instant life insurance policies you’re supposed to offer.
It’s hard to imagine that something could happen to you and the person you name as the beneficiary, but it is possible. Make sure to name a secondary and final beneficiary so your family doesn’t have to go through this long and painful process.
6. Your insurance may not pay if you die of certain causes.
Life insurance is meant to pay you if you die during the coverage period, but it is important to note that this is not always the case. Before you settle on a particular policy, you should find out the circumstances in which your policy will not pay death compensation. One of the most common reasons for not paying a life insurance policy is suicide. Other causes include dangerous activities such as sky diving, motorbike riding, bungee jumping, etc.
While your life insurance provider should state any reasons for not paying your life insurance policy, they may not, so it’s up to you to find out.
7. Life insurance through work is never enough
You may be offered some form of life insurance through your employer, which may also be called a “death in service” benefit. This will pay tax-free damages to a specified beneficiary in the event you die while being an employee of the company (the death does not have to be work related).
The return is usually two to four times your annual salary. It’s a generous perk, but consider if you want your family to have more than that. Also keep in mind that you may not stay with this company for your entire career, and your new employer may not offer an in-service death benefit. If so, you may end up considering life insurance later and the cost will be more expensive as you get older.
8. Life insurance can be for every stage of life
Life insurance isn’t just for people with young families. It can be an important safety net at other times as well – like when you’re buying a home or starting a business. And if you’re older, life insurance may help with a health setback from the huge financial impact on retirement savings—or leaving loved ones with a funeral bill they have to dip into their savings to pay for it.
It is true that not everyone needs every type of life insurance. If you are a young person without debt, you may not need insurance that pays benefits if you die. But you may want to consider protecting your income. If you are sick or injured and cannot work for a while, income protection insurance can help you stay financially independent by helping you pay your bills.