6 Life Insurance Misconceptions
Death and taxes are two certainties in life, and while there is no insurance to call upon during tax season, there is insurance for when you pass away that can ensure your taxes are paid off after you’re gone.
If you haven’t figured it out yet, we are going to be talking about life insurance, but this time from a different angle. Instead of talking about different types of policies and why you need life insurance, I’m going to go through all the excuses that people make for why they don’t have life insurance. I will give you the other side of each argument, and you can decide if your excuse is still valid.
As a quick recap, life insurance is a policy that you purchase for a set amount of money to be paid to your beneficiaries when you die. Basic needs include final expenses like funeral, debt such as mortgages and loans, education funds for children or grandchildren, income for surviving spouse, and leaving a legacy.
You should consult your Bridge First Insurance agent to work through a needs analyst to help come up with a tailored plan for you. The following misconceptions about life insurance come from real life experiences.
1. Life insurance is too expensive.
I agree with most of that sentence. Life is expensive, but life insurance is extremely affordable. Can a 45 year-old male obtain $100,000 of life insurance for under $20 a month? Absolutely!
Your life insurance policy will cost less than any other insurance policy you purchase on an annual basis, and when you think about how life insurance can pay off a mortgage, send kids through college, make sure a spouse doesn’t have to go back to work, or ALL OF THE ABOVE. Life insurance is the best insurance you can get for your money, and if you think about it—it could be the biggest insurance gap you have.
2. I’m Too Young For Life Insurance (Think Again).
An example: A 25 year-old male with good health will pay $60 a month until age 65 for a $100,000 whole life policy. A whole life policy as opposed to term insurance will last your entire life. That 25 year old will pay $29,000 of total premium over 40 years and will have $100,000 death benefit when he dies at age 106. That same policy for a 45 year-old male with the same health rating will pay $164 a month for 20 years (age 45 to age 65).
It’s the exact same policy for $100,000 except the 45 year old will pay $39,000 in premium over those 20 years. The 25 year-old just bought 20 extra years of insurance and paid $10,000 less, and also locks in his underwriting rate so that if his health ever changes, his life insurance class won’t. Buying young and making a smart decision could actually put you ahead of the game when it comes to protecting your family.
3. I Have It Through Work.
That is fantastic! You have at least made the decision to sign up for company benefits that offer life insurance. My suggestion is to max it out and get a death benefit as high as they will allow you (usually five times your salary). You also need to make sure the amount of life insurance through work is enough to cover your needs.
I’ve previously worked for two different Fortune 500 companies that offered both health insurance and life insurance to their employees. I no longer work for those companies and guess what, I no longer have health insurance or life insurance provided by them. If you change jobs, retire, get fired, or quit, that life insurance policy will not transfer with you.
What if your company decides to cut benefits? If you retire at age 65 and lose your company life insurance, it will be expensive when you try to get personal life insurance at that age. It is great to take advantage of company benefits because buying power can get you lower rates. However, you often need to plan for your non-working years and supplement with personal insurance to cover your needs.
4. I Don’t Need Life Insurance, I Have Nothing.
I hear this one a lot from my peers. Full disclosure— I am an unmarried 29 year-old with zero dependents, and when someone says this, my first question is, “Do you plan to stay that way?” You might not have a family now, but do you plan on having one eventually? Would you like to buy a house someday? If you are planning on things like this at some point, you should also plan for the life insurance you’ll need. I’ve already shown you an example where buying life insurance 20 years early could save you $10,000!
5. I want to get in shape before I get life insurance.
“I want to quit smoking before I get life insurance” or “I want to lose 15 pounds before I get life insurance.” Here is the harsh reality of that: If you haven’t done it already, what makes you think the next six months are going to be any different?
This is the ultimate “kick the can down the road” answer, and unfortunately if you are a smoker or overweight, you need life insurance before either of those have major health effects. The good news—you can get life insurance while you are a smoker or overweight, and if you quit or lose those pounds, you can be re-underwritten!
What does that mean? If you quit smoking six months later, you can go for non-smoking rates and have your life insurance premium reduced. Another bonus, when you go through underwriting again, you can’t get a worse rate than you currently have. It’s a win-win.
6. My Spouse Will Remarry, And I Don’t Want To Make Someone Else Rich.
Yes, people do say this, and you will get one response from me. “Is that really your plan?” I remind the person that it’s not just for the spouse, but for the entire family. It could be the difference between your family staying in a house, your kids staying in school, having their college education paid for, and your family maintaining their lifestyle.
I really hope that when people give this answer they are joking, but sometimes they aren’t.
I hope you learned a little bit more about life insurance and the importance and value it offers. Please check out some of our other blogs on different types of life insurance and learning how to calculate the correct amount for your policy. As always, I recommend you work with your Bridge First Insurance agent when making a decision on life insurance.
Speak with a Bridge First Insurance Agent today! (571) 249-3857
Dave has accumulated extensive knowledge of commercial insurance and the skill set that it takes to succeed. In 2013, he and co-founder Jack Cordes, joined forces to establish Bridge First Insurance. Through Bridge First Insurance, Dave utilizes his knowledge and unique expertise to offer clients the best care in insurance.