7 Myths About Life Insurance
No one likes rumors, especially when it comes to the ones we love most. And what do we love more than protecting our family and their futures—no matter what tomorrow holds?
Purchasing a life insurance policy is one of the best ways to secure that future. However, life insurance is also fraught with misconceptions, confusing terminology, and a few flat out lies. These reasons might explain why, according to LIMRA, only 54% of Americans have life insurance of any kind.
Don’t let apprehension win by avoiding the industry altogether. Instead, empower yourself with the truth about life insurance and make the smartest decisions for your family. Let’s put 7 of the most common life insurance myths to rest once and for all.
1. Stay-at-home moms don’t need life insurance.
The common misconception that SAHMs barely contribute financially is frustrating—and false. From keeping the home clean to encouraging your kids through tough math homework, every waking moment of motherhood would equate to actual expenses in the workplace.
Just think. Without a full- or part-time parent at home, who’d take care of the kid’s transportation, cooking, cleaning, tutoring, day or after-school care, and all those little things we rely on moms for? Even if your partner brings in a substantial income, expect the costs of covering her responsibilities to quickly snowball.
Of course, you can’t really put a price on mommyhood, but if you’re curious about how Mom’s jobs would add up in the workplace, check out our recent blog How Much Money is Mom Worth?
2. I’m still young and healthy. Life insurance is a waste of money.
Quite the opposite! Being young and healthy is the perfect time to secure affordable, high-quality life insurance. The healthier you are, the more affordable the monthly premiums. Once that premium is set, it’s not changing until your term expires—no matter what problems pop up.
But as the years tick away and health issues start mounting, so will those monthly premiums. A policy that would've cost $5/month at 35 with zero pre-existing conditions might surge by age 45 after the diagnosis of even minor maladies.
If you’re suddenly stricken with a major illness like cancer, comprehensive term life insurance may become out-of-reach altogether. This puts your family’s financial future in serious jeopardy. In hindsight, that tiny monthly cost would’ve been anything but a waste.
3. My pre-existing conditions will make my premiums too expensive, or I’ll just be rejected altogether.
Pre-existing conditions can make acquiring life insurance tricky, but don’t fool yourself into thinking the costs are insurmountable. It’s still often far less than you think. Also, having a pre-existing condition makes securing life insurance more essential. Even if the risks of something happening are low—it’s still higher than without a medical condition.
If an illness does cause acceptance roadblocks, don’t give up. Rejection from one insurance company doesn’t equal rejection from another. Extra shopping around might be necessary, but thanks to comparison apps like JennyLife, even this is now a breeze.
And if you are ineligible for term life insurance because of your health, there are other options. Though typically more expensive and less comprehensive, guaranteed life insurance, also known as a graded death benefit, provides coverage for anyone. In addition, many employers offer guaranteed group life insurance for little or no additional cost.
4. I have substantial savings. I don’t need life insurance.
This may be true in rare cases, but remember that raising a family is expensive—and unpredictable. Even deep savings accounts or strong investments may not be the ironclad support many imagine.
What if a devastating economic crash strikes, or an unexpected financial obstacle blindsides your family? Maybe your savings would dig you out of that first hole, but can it climb your family out of another disaster?
In contrast, a life insurance policy isn’t going anywhere. As long as your monthly premiums are paid, the agreed upon death benefit is guaranteed until your term ends.
5. My workplace life insurance policy is enough coverage.
Accepting workplace group life insurance is always a smart call—especially if it’s free. However, unless you’re single with no dependents, chances are it’s not nearly enough.
Every employer differs, but the typical workplace death benefit equates to your annual salary rounded up to the nearest thousand. According to the Bureau of Labor Statistics, the average American aged 35 to 44 earns $50,752 annually. If this was your salary, your beneficiaries would receive a $51,000 payout.
This is better than nothing, but after factoring out funeral expenses—which currently averages between $7,000 and $10,000—it’s far from enough to raise your kids into adulthood. Workplace insurance is a wonderful complement to term life insurance, but don’t confuse it for a replacement.
6. I have enough life insurance coverage.
Unless you’ve recently secured a new life insurance policy, there’s a good chance that your current plan is outdated. Ask yourself these 5 questions to see if it’s time for a reevaluation:
Has your family recently expanded?
Did you get married, or become a single parent?
Have you acquired more debt?
Did you get a new job, or a raise?
Have your overall living expenses risen for any reason?
If any of these life events have occurred since last securing a policy, reevaluate your policy. We get that it’s easy to get caught up in the craziness of life, but don’t ignore your financial reality. Any significant changes to your family’s budget typically signals the need for an expanded life insurance policy.
7. Life insurance is too expensive.
Unless you have significant health issues, life insurance is probably more affordable than you think. According to LIMRA, many Americans vastly overestimate life insurance expenses by around five times the actual cost.
Today, the average premium for a 30-year-old non-smoking woman is about $11.75/month for a $250,000 policy, about $17.33/month for a $500,000 policy, or $28.91/month for a million dollar policy, all for terms of 20 years.
And through innovative apps like JennyLife, compare dozens of quality quotes and score an A-rated policy for as little as $5/month in minutes! Not bad for about the price of a trip to Starbucks—and worth every penny for that extra peace-of-mind.