The best way to understand life insurance is to educate yourself. Buying a life insurance policy to fit your needs is easy once you avoid making decisions based on some of the most common myths surrounding life insurance.
Myth #1: I do not need life insurance since if I am a stay-at-home-parent and do not generate an income.
Although stay-at-home parents may not generate a cash income, they often supply all the valuable services whose replacement costs are quite underestimated. Contributions such as childcare, cooking, housecleaning and household management are crucial in making a family unit function properly and would cost a fortune to replace if that stay-at-home-parent were to disappear.
Aside from having to hire out services so that the surviving spouse can continue working, taking out life insurance would also help pay for funeral expenses and get the surviving family back on its feet by allowing the family to take its time to make all the important decisions on how they will now get along without the stay-at-home parent.
Myth # 2: I only need life insurance if I have young children or when my financial obligations are the greatest.
Obviously, a life insurance policy is needed most when your children are young or when you are just starting out in life and your debt is the greatest (such as a new home mortgage, car payments and credit card debt). However, life insurance is also needed later in life depending on your circumstances. If you are financially able to pay for funeral expenses and are capable of maintaining your lifestyle should your spouse pass away, you may want to borrow against an insurance policy that builds cash value. You may decide to take a trip or make home improvements. It is always nice to have “rainy day” money just in case of emergencies as well. Also, you may also use the life insurance policy to bequest to your future heirs. Just make sure to check with a tax advisor regarding any tax consequences.
MYTH #3: Except for face values, all life insurance policies are the same.
Life insurance policies are contracts between you and the life insurance company. Each policy is very specific in its requirements to obtain and maintain life insurance coverage.
Your life insurance policy will also stipulate situations in which the life insurance company will not cover a claim. For example, if a policyholder commits suicide within a year or two of the issue date carriers do not generally pay out the face value of a policy. Your policy will also indicate whether the premiums will remain the same during the term of the policy, whether it is renewable, whether you need a medical exam and whether you can upgrade or borrow against it. Be sure to check all your information for mistakes to avoid any problems for your survivors.
MYTH #4: Life insurance companies will not cover me if I am in poor health.
Many life insurance companies now cater to those who have less than perfect health. Even if another carrier has declined you, it does not mean a different carrier will not issue you a life insurance policy. You may have to pay higher premiums than those in good health, but there is coverage for those who suffer from chronic health problems.
MYTH #5: I can get a better rate of return if I invest my money elsewhere.
The main reason to reason for any life insurance purchase is to provide protection for your family; however, certain life insurance policies do offer a mode of investment. Policies such as whole life, universal life or variable life, offer other features that many people find to be a good investment. Permanent policies, in particular, provide a cash accumulation value that grows over time and can be borrowed against. Additionally, long-term rates of return on the cash value are generally comparable to relatively low risk investment products.
MYTH #6: Life insurance companies will always consider me a smoker even if I quit.
The good news for ex-smokers is that life insurance carriers do not hold you to your past. Most life insurance companies consider you a non-smoker once you been smoke-free for 1 full year. After one year you can get non-smoker rates.
MYTH # 7: I have life insurance through my job. That should be enough coverage.
The life insurance coverage through your employer may not be protecting you and your family as much as you think. It is important to evaluate the coverage your employer-paid insurance provides and calculate whether it is enough to keep your family financially comfortable should you die unexpectedly. Also keep in mind that when you leave your job for any reason, including retirement, your coverage stops. It might be necessary to take out a separate life insurance policy.
MYTH #8: The “rule of thumb” is to buy two to ten times my annual earnings.
There is a certain “rule of thumb” that suggests you buy a life insurance policy that is 2 to 10 times your annual salary. Just because you followed the rule of thumb, it does not necessarily mean your life insurance policy will be enough to provide for your loved ones.
The average American has a policy for about three times his or her annual income. If you want your family to be able to survive without touching the principle, keep in mind that your survivors usually can withdraw about 5 percent each year from the earnings on a sum of money. After that 5%, you begin dipping into the principle. So, for example, if your annual salary is $70,000.00 and you own a policy worth the average 3 times, your face value would be $210,000.00. Your beneficiaries would be able to withdraw $10,500.00 per year before using the principle amount. Would this $10,500.00 be enough to support your survivors?
Add up all other income sources, such as your spouse’s salary or pension, and any Social Security or other government benefits for which they would be eligible. Your life insurance policy should help close any gaps while also allowing your family to maintain their current lifestyle.
MYTH #9: I am covered through my mortgage lender. I do not need further coverage.
Mortgage life insurance only pays off your mortgage if one of the people listed on the loan dies before your loan is paid in full. Your mortgage lender will neither pay for your funeral expenses or any other debts you have nor will mortgage coverage supplement your surviving family’s income.
MYTH #10: If term life insurance is really so cheap there must be a catch.
False. Basic term life insurance policies offer you coverage so long as you pay your premium. You choose the duration of time you need life insurance coverage and your rate will be based on certain the answers you provide on the questionnaire. Term life insurance has no cash value. It’s pure life insurance and that is what makes it affordable.
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In order to meet the differing needs of many individuals and families there are now many types of term life insurance policies available. This is because the protection each policy holder needs is different. So in order to get the most from a term life insurance policy you need to consider your needs and look at which temporary policy you should opt for.
Life insurance and financial planning are two aspects that many of us don’t have, don’t know about and we haven’t spent enough time analyzing our situations to find out how we could benefit from them. A vast percentage of people throughout the nation are living their lives paycheck to paycheck without thinking about what the future may hold.
We live in an era where we want and expect everything done in five minutes so an instant coverage term life insurance policy is a perfect reflection of the age we live in. It is an insurance policy that will inform you of whether you have been successful in your application within 10 minutes of submitting it.
Finding low cost and affordable term life insurance that doesn’t require a medical isn’t something that has to be difficult. There are now countless insurance companies that offer you this type of coverage, giving you a vast amount of choice when it comes to the policy you take out. If however you don’t have time to shift through insurance companies separately over the Internet then why don’t you make use of a website that allows you to enter all of your details once and then generate a number of quotes instantly.
As no one knows what’s around the corner there really is no time to loose when it comes to gaining life insurance, which is why instant coverage term life insurance is advancing so much in popularity. Your approval is decided within minutes and if you are successful you are covered instantly. So how do you go about purchasing this form of life insurance? Simple, through the Internet.
When making the decision of what life insurance to take out it generally comes down to two choices; either term or whole. These are pretty much self explanatory due to their names. Term life insurance is taken out for a certain, specific amount of time; it is generally a temporary form of insurance whereas whole is a type of insurance that you pay into for the long run; you will be paying it up until your death.
If you smoke it may come across as unfair that you have to pay a higher life insurance premium when compared to someone who doesn’t. It can often come across as a punishment for smoking. Insurance companies are however well within their rights to charge more for a smoker than a non-smoker. The reason for this comes with the fact that someone who frequently uses tobacco is considered to have a shorter life expectancy than someone who doesn’t.
If you tried to apply for life insurance a few years ago you would have faced a two month wait for your application to get through the submission process but that’s not all! You would also have to wait for the underwriting of your policy and then you would need to take a medical exam before you even receive your policy through the mail.
No one likes thinking about the possibility of their own death but many people can often overcome this uncomfortable thought and, in a way, accept the inevitable. However trying to overcome the idea of having a medical in order to gain a life insurance policy strangely isn’t so easy for many people. A lot of us don’t end up taking out the protection we need purely because we don’t want to undergo a physical exam. In this sort of situation you may want to look more into term life insurance with no medical.
What’s one of the most off putting aspects when it comes to gaining a life insurance policy? If you ask this question to a range of people I can guarantee that the biggest reply you will get is having a medical exam.