02 Aug 7 Myths about Life Insurance
There are a lot of myths and misconceptions when it comes to life insurance.
You need to know the truth when it comes to what you are purchasing, don’t just assume based on rumors you’ve heard.
Mistakes made when buying life insurance have long-lasting consequences. If your family isn’t provided for as they need to be, you won’t be here to fix it.
You need to choose the life insurance that is right for you.
You can do so by avoiding these 7 common myths:
Myth #1: You should buy seven times your annual earnings.
The rule of thumb that says you should have so many times your annual income isn’t necessarily true. The average American has a policy three times his or her annual income. Your dependents should be able to withdraw 5% each year from your insurance policy money without having to touch the principal. If you are making $60,000 annually and you purchase three times your annual income, you have a $180,000 policy. This means your heirs will only be able to withdraw $9,000 each year.
Most people have less coverage than they need. To calculate the amount you actually need, estimate how much your heirs will need to maintain their lifestyle without you. Include the costs of childcare, education, and emergencies. Add up all other sources of income and subtract it from the expenses. This will show how much of a policy you need to have.
Myth #2: Agents from Life Insurance Agencies give you the best deals, the internet never does.
Don’t assume that you’ve gotten the lowest price just because it’s the agent that sells your car insurance. The Life Insurance Store is a great place to shop and research life insurance. We represent over 60 companies.
You can’t just compare rates. You need to also compare the policy that you are receiving. Shop here for the best policy for you.
Myth #3: All policies are the same, you are just charged more
You have to read your policy. It is a contract between you and an insurance company. It tells you what is payable and what isn’t. All policies have different features. Make sure that you have received what you were told you were getting. Make sure that all names are correctly spelled and all numbers are right. Your written policy is what matters, not your phone conversations or your agent’s promises.
Myth #4: You should always name your estate the beneficiary
If you do, the proceeds will go through probate. This means that your policy proceeds could be tied up for several months to over a year. Your heirs will not have access to the money during this time.
The proceeds will also increase the value of your estate, which means your family might have to pay estate taxes. If you have an estate over $1.5, you will pay taxes depending on your state. Estate taxes are often as high as 48%, so do everything you can to avoid them.
Myth #5: If you are in poor health, you are uninsurable
This simply isn’t true. There are a lot of companies out there that specialize in coverage to those who have or have recovered from a serious illness. The coverage is often expensive, but you can get it.
Being turned down once doesn’t mean it will happen again. Shop around, one company might charge you an added surcharge, while another will charge you a standard to preferred rate. It really depends on the company, not just your health status.
Myth #6: Insurance agents know what you need
Many life insurance agents are looking out for your best interests, others aren’t. That’s the way it is. Agents are compensated differently for selling different products; that often influences what they sell you. We spend quality time with our clients to make sure they are getting what they want and can afford,
Myth #7: Life insurance is more important than disability coverage
Most people recognize life insurance as an important part of their financial planning. They often overlook the importance of disability insurance. You are 50% more likely to be disabled than you are to die when you are under the age of 50.
Most people will find that term life insurance best fits there needs and offers less expensive premiums. If you do, you also need to have disability insurance.
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