One of the most important decisions you can make is to purchase a life insurance policy. In fact, life insurance can play an integral role in your estate plan. Yet, so many people lack a policy. These life insurance myths are often why. Here’s the truth behind these common misconceptions.
1 – I Don’t Need Life Insurance Unless I Have Children
Life insurance is not needed simply to support children. Here’s an example of how it might benefit someone without children. If you still have student loans, your parents likely co-signed for them. If you die unexpectedly before the balance is paid off, your parents will be liable for the balance. Student loan debt is not forgiven. A life insurance policy would help cover that debt and other financial obligations, relieving your heirs of additional hardship. This is just one of many possible scenarios that highlight the need for life insurance regardless of whether you have children.
2 – Life Insurance Is Too Expensive
Another of the most common life insurance myths is that it’s simply too expensive to buy life insurance. The fact is, you don’t need to be wealthy to afford it. In your 30’s, a $500,000 term life policy might cost you just a few hundred dollars per year if you’re healthy. You probably spend more on coffee than you would on life insurance. The mistake that many people make is they wait too long to purchase. The older you get, the more expensive it will be. Additionally, don’t wait for the onset of an illness to think about life insurance.
3 – Life Insurance From My Employer Is Sufficient
Many employers offer life insurance equal to or double your salary. This is a nice benefit, but it shouldn’t be what you rely on for estate planning. The policy is only good while you are employed. If you lose your job or change jobs, that ends your coverage. Additionally, the amount is often insufficient for proper estate planning. Life insurance should be enough to cover your debts (mortgage, loans, credit cards, etc.) and to replace your income for a certain number of years, relieving financial burden on your family.
4 – A Term Life Policy Isn’t Worth It
Term life insurance is typically the most affordable option. However, there’s a negative view of them because they end and provide no residual value. Your auto insurance policy premium is due every year and provides no residual value or return, yet we don’t interpret that as wasteful. Life insurance should be no different. Sure, policies with extended terms are ideal, but they also cost significantly more. If you can’t afford a whole life policy or find that the additional money would be better invested elsewhere, term life insurance is certainly better than no life insurance at all.
Summary of Life Insurance Myths and Estate Planning Tips
Now that we’ve cleared up some of the most common life insurance myths, it’s time to evaluate your life insurance needs and how that fits in with your overall estate plan. Contact our team to understand your options and to prepare a plan that protects the future well-being of your heirs. We work with your financial advisor and other experts to ensure that your plan is accurate and to update your plan yearly to reflect changes in your life and finances, providing you maximum protection and peace of mind.