If the thought of purchasing life insurance overwhelms you, this article will provide you with tips to give you clarity on some of the fundamentals of life insurance planning. Since confusion can lead to missing key information, we will discuss how to avoid five common life insurance misconceptions.
#1 Group insurance is all I need
First, group life insurance from your employer is unfortunately almost never enough coverage to protect your family in the event of your death. In addition, group coverage will only last as long as you are employed, and job security is rarely certain. While most group coverages offer an option to convert group life insurance to personal insurance when you leave your place of employment, it’s rarely an ideal time to be adding new expenses to the family budget, and at older ages, purchasing new personal life insurance can be costly. A professional insurance advisor can show you how group and personal insurance can work together to ensure that your family’s standard of living and plans for the future are fully protected in all circumstances. For more information on what to expect when putting together a comprehensive insurance plan, watch this Smart Talk video.
#2 I have plenty of coverage
Next, not purchasing enough life insurance is an all-too common problem that many people face. Most people underestimate how much money is needed to provide their family with financial security in the event of their death. Although there are commonly used rules of thumb when it comes to determining how much coverage your family needs, such as multiplying your income by ten, these are often inaccurate. Take a look at our previous article, Life Insurance for Financial Protection, for a basic explanation of how much coverage your family may need.
#3 Term insurance is the least expensive coverage
Term insurance is popular among young people as the premiums are relatively low because as the name suggests, it protects you from the financial impact of death for a set period. This type of insurance is preferred for parents who would like to support their children financially for 5, 10, or 20 years in case they pass away while the children are still dependent. That being said, although term insurance comes with many benefits such as low premiums, these premiums escalate exponentially once the chosen term is over. Although term insurance still has its place in many people’s lives, if you are looking for long-term coverage, purchasing only term is not economically efficient. For more information on the best type of insurance for you, watch this Smart Talk video.
#4 I Have A Policy, I’m Done
Life insurance is arguably the most important purchase decision you will ever make. Once you buy it, it is crucial to review your policy and contract every three years to ensure that it still aligns with your current lifestyle and your needs. For example, if your beneficiary was a spouse that has died or that you’ve separated from, you must change your designated beneficiary, as you want your death benefit to go to the appropriate person. Additionally, your needs may change overtime which requires you to verify whether or not the policy you purchased still fits with your current and anticipated future needs. For this reason, we recommend having an adaptable life insurance policy that can adjust to you and your ever-changing lifestyle. Check out our EquiBuild page article to gain a better understanding of adaptable life insurance options.
#5 I Have Plenty of Time to Buy Life Insurance
Since there exists a strong relationship between your age, health, lifestyle and your insurance premium rates, waiting too long to purchase life insurance can be an expensive mistake. The younger and healthier you are, the lower your premiums will be for both term and permanent insurance. In this Smart Talk video, you’ll see some of the insurance needs you’re likely to have throughout your lifetime, highlighting the importance of building an affordable and flexible insurance plan early on that will last through all of your life’s adventures.
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Contact your insurance advisor to receive more information on these life insurance topics.