We’ll do anything to protect our loved ones, right? But the decision to buy life insurance is often met with hesitation, confusion or even denial. After all, it’s not an easy subject to think about: What would happen if you were to pass away? When it comes to protecting your loved ones with life insurance, it’s important to separate fact from fiction.
To get started, read on to learn the truth about eight life insurance myths — it may change your perspective and lead you to make informed decisions about purchasing a policy.
Myth 1: I’m single, or married with no children, so I don’t need life insurance.
Even if you are in this group, life insurance is important. Life insurance may help your loved ones pay off your debts (like some private college loans, for instance) if you pass away. Planning early not only helps protect your loved ones from burdensome expenses, but it also gets you started on a financial plan for the future.
Myth 2: I can’t afford life insurance.
According to the 2015 Insurance Barometer study conducted by Life Happens, 80 percent of consumers misjudge the cost of term life insurance. Life insurance can be very affordable for many people, depending on the coverage you’re looking for. You can start with a policy that fits your budget, and you may be able to purchase additional coverage later on.
Myth 3: I’m a stay-at-home parent. I draw no income. I don’t need life insurance.
If you’re a stay-at-home parent, life insurance is still important. While you may not bring in an actual paycheck for the household, you likely provide services that could cost tens of thousands of dollars to replace each year. These may include child care, daily transportation, home maintenance and cooking, to name a few. If you were to pass away, life insurance may help cover some of these costs.
Myth 4: I have a life insurance policy through my job. If I take another job or get laid off, I can take the policy with me.
Typically, your employer-offered life insurance policy isn’t portable — meaning if you leave your job, you’re probably also leaving your life insurance protection behind. However, when you buy your own, separate life insurance policy you decide how long you want to be covered. Additionally, with an individual policy, you may be able to get more personalized coverage that fits your financial needs.
Myth 5: My beneficiaries will have to pay income taxes on the proceeds from my life insurance policy.
Your life insurance death benefits are generally income-tax-free and do not have to be reported, according to the IRS. Life insurance helps provide your family with income-tax-free money to help pay for a number of things like funeral expenses, a mortgage, or college tuition.
Myth 6: If I get a term life insurance policy, I can’t convert it to permanent or whole life insurance policies.
It is possible to convert some term life insurance policies into a permanent life insurance policy, depending on the policy purchased. However, it’s a good idea to speak to your agent up front, as these types of term policies typically must be converted within a specified time period. You also may encounter additional requirements with a convertible term policy, such as increasing premiums.
Myth 7: I don’t need life insurance once my children are adults.
Life insurance can help you in many different stages in your life. Life insurance later in life has a number of advantages, such as helping to relieve the burden of paying for final costs, paying for state estate taxes your heirs may face, paying off any debt you may have left behind, or simply leaving your children with an inheritance.
Myth 8: I have a comfortable amount of savings, so I don’t need life insurance.
While your savings may last through your retirement, have you thought about final expenses? According to the National Funeral Directors Association, the national median cost of a funeral with a burial in 2014 was $7,181. If you don’t have enough money saved, it is possible your loved one won’t be able to pay off final expenses. Keep in mind, if your mortgage has not been paid off, your loved ones may not be able to hold onto your home, if not enough money has been saved.
No matter where you are in life, it’s important to help protect your loved ones and your assets with life insurance. If you have any questions, reach out to your Colonial agent today.
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