Undoubtedly, the rules and technicalities governing insurance make it tricky and cumbersome. Are you shopping for life insurance for the first time? You may be overwhelmed, perhaps, due to the many options staring at your face or lack of facts to make an informed decision.
Do you think insurance is expensive, or do only healthy people qualify for coverage? Don’t conclude yet. Instead, wait until you finish reading these common myths about insurance. This will help you understand your options, debunk common myths that you probably thought were facts and choose the best coverage that fits you.
Myth 1
· Life insurance is not for healthy and young people
This myth has prevented most people from getting the most from their coverage. Are you on this train? It would help if you understood that even though mortality may not be a priority to young people, the price of a life insurance policy usually goes up as you age. That’s why it’s hard for the elderly who failed to get it when they were younger to purchase it later on.
Getting life coverage early will help you access lower rates and make the most of it. According to a 2020 Insurance Barometer Study, more than 40% of people in America wished they had gotten life insurance when they were younger.
Your health status is the first thing to consider. However, your coverage options may be restricted if you buy life coverage after developing a severe health condition.
While you are young, it’s hard to forecast what life may throw at you in the future. However, life can be unpredictable, and the unforeseen usually happens. The pandemic is an excellent example of how life can throw its ugly head into our plans and ruin it in a day.
If you are young and healthy, you should not postpone buying life coverage. The benefits may not be glaring now. But they may soon.
Myth 2
· Disability payments are not taxable
This is a common myth many still hold on to date. Before buying car insurance for disabled adults, you should know that there is no “one for all” exemption for disability. Although, many disability payments are exempted from tax, such as social security disability, veteran disability, and worker’s compensation. These are neither taxable nor reported on the tax return.
But this is not a yardstick to assume that any disability payment cannot be taxed. So, for example, if you receive a disability payment under a no-fault auto insurance policy, such payment is exempted from tax.
Also worthy of mention is that if you buy a policy with post-tax dollars on your own, it won’t be taxable.
However, most coverage buyers seem confused when buying a policy as an employer-sponsored program. With regards to this, it’s best to seek expert advice. A professional tax practitioner is in the best position to advise you on how to distinguish disability payments that are taxable from the ones that are not.
Myth 3
· You don’t need life insurance if you are single with no dependent
This myth is also synonymous with the general belief that only breadwinners need life insurance. Even though breadwinners need life insurance the most, people with no dependence do. Many small business owners buy a life insurance policy to protect their business. However, this is ideal if you have employees or a partner that depends on you.
Your financial goals and needs usually determine your life insurance cover. Whether you are single or married with kids, your financial situation will determine how much coverage you need. It’s best to speak to a financial advisor on the issue to know the best coverage for you.
More so, young people usually pay less for premiums. But if you are above 50 years, it may still be possible to get life insurance. However, many insurance companies will tell you bluntly that it’s not possible.
Many life insurance agents propagate the myth that anyone who fails to sign up for life insurance while young may have missed the boat already. It is more or less like a strategy most insurance companies use to bet on the longevity of people.
Myth 4
· Group life insurance is enough
This is life insurance coverage gotten through an employer. It’s usually two times your basic salary which will not be enough to support any member of your family. In reality, you will need up to 10 times your basic salary.
However, one important thing you should consider when choosing group life insurance policies is their portability. This type of insurance is usually tied to an employment contract. Therefore, they are terminated when you leave the job.
That is why it’s better to get individual life insurance policies that will ensure you are covered when you leave the job. This is ideal because most of these types of coverage span different employment contracts.
So why not ask your employer some questions before you sign up?
When it comes to life insurance, there is no perfect plan. It depends on what works for you. Identifying your needs concerning a life insurance policy is what matters.
Do you want your insurance contract to end as soon as you leave your present job? Again, it’s best to consider your options before opting for any group life insurance policy in the workplace.
Myth 5
· Insurance is expensive
Most people think insurance comes with a heavy price tag. But, according to Life Happens, a non-profit life insurance company, half of Americans overestimate the cost of life insurance by up to three times its actual price.
The reality is that insurance premiums cost is relatively low. In addition, young people usually pay minimal premium fees than senior citizens. If you need accurate life insurance quotes, we recommend you speak with a professional financial advisor or a licensed agent. Alternatively, you could also use online calculators to get an estimate.
Several factors determine the premium for life policies. First, you should understand that insurance companies are betting on the odds that you may live longer than expected. Hence, they make more profit.
These companies use different premium and underwriting calculations to determine the compensation they ought to pay. Hence, that is why a life insurance cover differs from one company to another. But, generally, insurance is not expensive.
Myth 6
· I do not need disability insurance because I’ll never get disabled
Do you think you don’t need disability insurance because you will never get disabled? This is a common myth prevalent among young people. If you are less than 30 years, it’s easy to think that you are invincible, and you really can’t imagine yourself in a wheelchair, do you?
The fact is that no one suffering from disability chooses to become disabled. As we get older, we have many choices to make, and becoming a disabled person does not happen by choice. It happens indiscriminately and, most times, without notice.
Secondly, a disability doesn’t just arise from accidents or serious injuries. For these reasons, you may think you can never become a victim. So what is the use of getting an insurance policy? You may ask.
The fact is that the leading cause of disability for both the young and the old is neither an accident nor an injury. Research has shown that illnesses could result in thrice as much disability as those caused by accidents.
A financial planner may recommend getting disability insurance to protect your current and future income. Wouldn’t you transfer the risk to an insurance company than retain it?
Myth 7
· It’s better to buy term and invest the difference
This is a myth because term life insurance is different from permanent life insurance. The cost of the former usually gets high as you age. Therefore, permanent life insurance is the perfect option if you want coverage that can last until death.
It’s also essential that you consider non-insurability. This could be disastrous for anyone with estate tax or mortgage that needs to be paid by the insurance company.
It would help if you considered avoiding such risks with permanent coverage because the coverage is usually paid after several premium payments and will remain active until death.
Final Thought
There are many myths about insurance. Unfortunately, we cannot exhaust them all in this post. But, since these myths seem to increase each day, do you forgo insurance instead? Not at all!
It’s best not to leave insurance out of your budget. Life may happen at any time. Your income may dwindle in the future, and not falling into disability is never a promise.
An insurance policy that befits your situation is the best option right now unless you have enough income and assets to cover your expenses and debts after death. But how many people have enough income to last for many months without working?
It’s time to save you from these common myths about insurance. Speak with a licensed agent or a financial advisor about your situation, plans, and life goals. Remember, there is no perfect insurance plan; it’s about what is ideal for you.