Life Insurance Facts and Common Misconceptions
Nobody wants to talk about death. However, it is a reality for us all. After we are gone we want to be sure those we leave behind won’t be stressed about finances. When it comes to protecting your loved ones with life insurance, it’s important to separate fact from fiction.
Isn’t my employer-provided life insurance coverage enough?
It might not be. If you have access to a group life insurance policy at your workplace, there is usually no harm in participating, especially if it’s included as part of your benefits package. However, it may not be enough to cover your beneficiaries’ needs. Experts typically recommend having in the vicinity of 10 times your annual income in life insurance. That’s a big difference from the one to two times your annual salary that’s standard with employer-provided life insurance. (1)
Most people do not have enough coverage
Only 54% of Americans have life insurance. Of those insured 27% only have group employer coverage— which usually isn’t enough. Essentially that means many families may struggle after the death of the insured because there might not be enough money to settle all debts, funeral costs, and so on. (2)
Many think life insurance is too expensive
63% of consumers say they don’t purchase life insurance because it’s too expensive. A lot of consumers believe life insurance costs nearly 3 times the actual price.
Consumers overestimate the cost of life insurance, especially younger generations; 44% of Millennials overestimate the cost at five times the actual amount. For example: that would lead some to think the pricing for a 40 year old male, 20-year term life insurance policy with a death benefit of $250,000 would be $108.75 a month. In actuality a policy like this could be an average of $21.75 a month. (3) (4)
Life Insurance can provide future income for your children and loved ones
Even if you have no other assets to pass to your heirs, you can create an inheritance by buying the right life insurance policy and naming them as beneficiaries.
Is life insurance worth it?
For many term life insurance is a worthwhile (and affordable) way to help financially protect your loved ones. A policy’s death benefit could help:
• Replace lost income and pay living expenses, like rent or a mortgage
• Pay debts you leave behind
• Provide for your kids’ care if you are a stay-at-home parent
• Pay for burial, estate taxes and other final expenses
• Fund college costs
• Pay unpaid medical bills or taxes
• Create an inheritance for those you love
Has the pandemic made getting life insurance more difficult?
Life insurers are assessing their guidelines constantly as the situation evolves. Questions about COVID-19 have made their way into the application process. During this time, there have been slight changes in the underwriting for life insurance.
Head over to our blog Life Insurance in the time of Coronavirus for more information on travel, underwriting and life insurance policy issuing during the current climate.
Don’t you get a better deal purchasing life insurance online?
While the internet is a great place to do your life insurance research you don’t necessarily get a better deal online. What you won’t get online is the personal experience of having a trusted expert to advise you on how much life insurance you need, which company is likely to give you the best rate based on your individual situation and a thorough explanation of the application terms.
Agents can also help guide you to a highly rated carrier that is financially stable. Financial strength is especially important for life insurance companies because you’ll want a company that can pay claims many years down the road. Also, and agent can help you at any time throughout your policy if you have any issue, and/or have experienced any life changes.
Our team at Bearingstar is laser-focused on ease-of-doing-business and pride ourselves on packaging the highest level of planning into our client’s preferred means of communication. Most importantly, our team is on-hand and readily available to help you and your family procure a life insurance policy and answer any questions you may have. Contact us today for a quote!
1) Fried, Carla “Why employer-provided life insurance can backfire.” CNBC.COM THU, SEP 28 2017 https://www.cnbc.com/2017/09/27/why-employer-provided-life-insurance-can-backfire.html
2) “Life insurance statistics in 2020” Policygenius.com https://www.policygenius.com/life-insurance/life-insurance-statistics/
3) Facts + Statistics: Life insurance: iii.org https://www.iii.org/fact-statistic/facts-statistics-life-insurance#Life%20insurance%20ownership
4) Knueven, Lynn “The average life insurance rate by age, sex, and coverage” Business Insider JUNE 3, 2020 https://www.businessinsider.com/personal-finance/average-life-insurance-rates