By Ayesha Haider, BA, MBA, AFC Candidate
Life insurance is probably the most dreaded financial product for people to start a conversation about since it forces us to acknowledge our own mortality.
A 2013 study by State Farm Insurance found that parents would rather talk to their kids about drugs, alcohol, religion or politics than life insurance. But delaying or foregoing a conversation about life insurance exposes your family members and loved ones to a significant amount of financial risk.
According to a 2015 study, cost is the reason most Americans give for not owning life insurance. However 80% of consumers misjudge the price for term life insurance.
In addition to cost, the following are three common misperceptions that people have about life insurance:
- Life insurance is for people who have dependents: This is a mistaken belief among people who are single or who do not have dependents that are reliant on them for their financial well-being. However, even an unmarried individual’s death is likely to impact those around them both emotionally and financially. There are funeral and other “end-of-life” expenses to cover and, in some cases, your death may result in a loved one being responsible for your debt and other financial obligations. Investing in life insurance as a single adult helps shield relatives and friends from any financial burdens your death may cause. It is also a good way to leave a legacy by donating to a charitable organization that you care about or a relative that you’d like to provide for.
- If I live past a certain age my life insurance will go to waste anyway: While this is true of term life insurance – which provides coverage up to a certain age – it is not true of whole or permanent life insurance. This alternate type of life insurance has a longer validity than term life insurance and will provide coverage until the policyholder reaches the age of 100. Permanent life insurance usually has a higher premium than term life insurance, but that is because it combines a traditional death benefit with a savings plan that allows you to build up cash value that grows tax deferred.
- If I have poor health I will be rejected for life insurance benefits or my premiums will be much higher: In today’s competitive financial landscape insurance companies are catering to every sector of the market including high risk individuals. Whereas high risk life insurance is likely to have higher premiums and more restrictions than a traditional life insurance policy, the benefits of having life insurance far outweigh the costs. This is especially true of veterans and servicemembers who have access to a wide range of life insurance products and packages offered by the VA at a very reasonable cost.
Life insurance is sure to benefit individuals in all stages of life regardless of their medical history and is a critical part of becoming financially responsible and independent. Don’t let misconceptions or discomfort deter you from making arrangements for your loved ones to be taken care of after you pass. For more information about life insurance visit www.lifehappens.org.
Join us to learn more about life insurance with Dr. Barbara O’Neill and Ruth Berkheimer. This webinar will focus on basic insurance principles and terminology, who needs life insurance, reasons for buying life insurance, life insurance policy features, the life insurance needs analysis process, tips for buying life insurance, and life insurance needs and policy options for service members and military families, including SGLI, Family SGLI, SGLI disability extension, VGLI and TSGLI. To register visit the event page.