Six Life Insurance Myths

When it comes to life insurance there is plenty of misleading information and myths. Life insurance is not a simple subject and can be confusing to even the most educated person. Here we look at some of the most common life insurance myths and the truths behind them.

Myth # 1

When it comes to life insurance there is plenty of misleading information and myths. Life insurance is not a simple subject and can be confusing to even the most educated person. Here we look at some of the most common life insurance myths and the truths behind them.

Myth # 1

It is a commonly held belief that only those with dependents need to have life insurance and that single people can go without it. This is not the case. Single people with no dependents still need to have money to pay for medical and funeral costs if they pass away, as well as money to cover the cost of any personal debts they may have upon their death. If you die and are uninsured then you may leave a trail of unpaid bills for your executor and/or loved ones to cope with. That would be terribly unfair.

Myth # 2

Many people believe that the amount of life insurance they require only needs to be equal to twice the amount of the salary they earn on a yearly basis. In reality most experts will tell you that you should have six to 10 times the amount of life insurance that you are earning annually. Another way to calculate it is to multiply your annual income with the number of years until you plan to retire. Be aware too that besides your medical bills, funeral bills and personal debts you may have other debts to pay off such as your home loan and family bills.

Myth # 3

It is a misconception that the term life insurance coverage you have through your workplace is adequate. It may be in some cases but not in others. If you are a single individual who earns a modest income then the term coverage you have through your employer may be all you need to be sufficiently covered. However those who are married and who have dependents may require additional coverage if the term policy does not cover as much as it needs to (such as estate taxes or an estate for a charity).

Myth # 4

If you think that the cost of your premiums will be deductible then think again. In most cases they will not be. The money that you spend for personal life insurance is rarely if ever deductible. The one exception to this is when the policyholder in question is self-employed and the coverage being purchased is purchased for the business. In that case the premiums are deductible on Schedule C of the Form 1040.

Myth # 5

If you believe that you must get life insurance for yourself no matter what the cost then you need to hold on for a moment before you go overboard. Having life insurance is definitely a good idea but you should not do it at any cost. If you have no debts to speak of and you have already put aside money to cover your medical and funeral bills then purchasing life insurance may be an expense that you do not require. This is especially the case if you are a single person and have no children.

Myth # 6

Have you ever been told that you would be smarter to invest your money than to purchase life insurance? If you have then disregard this not-so-helpful advice. Investing is good but you still need to get a life insurance policy. Until you reach the point where you have accumulated at least one million dollars in assets you still need to insure yourself with a million dollar life insurance policy. Choosing to depend upon your investments instead of buying life insurance especially when you are young and are starting a family is not so wise. What will they do after your current assets run out after you die? Think it through carefully and buy life insurance for you (and your family’s) peace of mind.