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The Top 5 Life Insurance Myths
With the different types of life insurance products out there on the market, they can seem like very convoluted, confusing products to understand, and because of this there are a lot of widely believed myths flying around out there about them. Believing these myths can cause you to miss out on the incredibly powerful benefits that these products can provide you. So let’s jump in and call out the top 5 offenders.
Myth #1 - It’s Just a Death Benefit
FACT: The above statement is true only if the type of life insurance policy that you have is term life insurance. However, when you get into the permanent types of life insurance products, this statement no longer applies. In reality there are a number of features and benefits that are available, some at no cost. There can be guaranteed returns, dividend returns, the option of long term care benefits, and many other “living benefits” that you can take advantage of.
Myth #2 – You are single, have no dependents, so you don't need life insurance
FACT: Dying isn’t cheap. You have your estate that needs to be handled, and taxes that need to be paid. You might have unpaid debts that need to be taken care of, not to mention funeral costs. Life insurance is an excellent way to ensure that this is all covered. Want another reason? Life insurance is also an excellent tool for retirement planning, and building wealth. Check out our blog post about the power of whole life insurance and the living benefits it can provide you. You can access it HERE.
Myth #3 – Whole Life insurance is more expensive than other types
FACT: Term life insurance can be the cheapest type of coverage out there. But all it provides is a death benefit. There is no cash value attached to it, and it provides no “living benefits” to you. The only way it will benefit you is if you pass away while the policy is still in force. If the coverage period comes to an end and you’re still alive, then you’re left with nothing. Depending on the type of term policy you have it can also end up costing you more over time as premiums can increase every year. While whole life insurance premiums are more expensive, the list of benefits that you get in return is long.
Myth #4 – Life insurance is a horrible place to keep your money
FACT: Your life insurance policy has two components: a guaranteed side, and a non-guaranteed side. The cash value that sits inside your policy is not tied to the performance in the stock market. So if the stock market is tanking, your cash value will be protected. Traditional investment products could never give you that. Plus, life insurance is the only product out there that can give you a guarantee in writing that your money will grow every single year.
Myth #5 – You only need to buy it once, and then you don’t have to think about it again
FACT: This is probably one of the most common mistakes that people make with their life insurance coverage. They buy a policy, put it away in their filing cabinet and never crack it open again. Life changes, and so do your needs. What you need when you are at the beginning of your career, or starting a family and buying your first home is different than what you need when your kids are grown and the house is paid off and you are looking forward to retirement. Did you get married? Divorced? Have a baby? Start a business? Get an inheritance? These are all examples of life changes that justify a conversation.
Your life insurance policy should be reviewed once a year with your insurance agent to make sure that the policy that you have in place is still the best solution for what you need it to do for you. Too many times people realize they don’t have enough coverage, or that the coverage is going to drop off when they’re 60 years old when they still need it, or that there was another option out there that would have given them so much more, and for little to no additional cost than they were already paying.
These myths are only a glimpse at some of the mis-information that's out there. What you don't know CAN hurt you!
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