No one likes to plan for a major injury or early death.
Unfortunately, illnesses and other accidents can occur to anyone, at any time in their life.
Life insurance is a necessity to make sure that the people you love will be taken care of financially should anything happen to you.
The real question is, what is and isn’t true about life insurance?
Use this guide to learn more about common life insurance myths and the truth about term and whole life insurance.
Common Life Insurance Myths
Most of the misconceptions people believe about life insurance are just ways to convince themselves they don’t need it. For most people, it’s a good idea to have at least some life insurance coverage to help cover expenses after they are gone. For parents with young children, this becomes even more paramount.
Here are some of the most common arguments.
I’m Young, Single, and Healthy
Many single adults in their 20’s and early 30’s don’t believe they need life insurance. They argue that they have no dependents or spouse to take care of and no one counting on them for support. Oftentimes they can’t convince themselves that there is any need since their lives have just begun.
Sad to say even single people will likely leave behind significant financial obligations after they are gone. The average cost of a funeral in Canada is $15,000. If you don’t have life insurance it will fall to your parents or other family members to cover.
This total doesn’t count student loans, credit card debts, and other major financial considerations. Even if you aren’t directly supporting anyone, you don’t want to burden those you leave behind.
I’m a Stay-at-Home Parent
Even if you don’t have traditional employment it’s important to look at the value you provide to your family. Childcare alone is a significant expense in households with two working members. Add in cooking, cleaning, transportation to school and extracurricular, and the cost of replacing your contributions is often staggering.
These are all things that will have to be taken care of when you’re gone. Think also about the state of mind your partner is likely to be in after your unexpected parting. Having a reasonable amount of coverage will give them the time to grieve without having to worry about financial considerations.
You don’t even have to get your own policy. Many insurers offer joint life policies that cover both you and your spouse. This allows you to consolidate your monthly payment into one low amount.
My Employer Provides a Policy
This seems like a reasonable protest on its face. Many full-time employees are able to purchase a discounted life insurance policy from their employer. The problem comes in if you leave your current employer or are fired.
Most policies only cover you while you are employed with that company. If you are unexpectedly laid off or fired you may find yourself instantly without coverage. Even worse, you will likely be in a different expense category the later in your life you apply for coverage.
Having your own personal policy to supplement an employer’s is a great way to lock in low rates for the long term. It gives you the peace of mind that comes from knowing you are covered no matter how your employment situation changes.
Two Times My Annual Income is Enough
Life insurance policies from employers are commonly offered as multipliers of annual income. The most basic policy usually starts at twice your annual income, but unfortunately is not nearly enough.
When deciding how much coverage to purchase you should look at all the major expenses you expect for your family. If you have children, absolutely get coverage that will allow them to pay for college.
If you own your home, how much do you owe on your mortgage? Could one person’s income cover expenses and still make monthly payments?
Two years income isn’t even close to enough to cover these serious and necessary expenses. Sit down and add up your annual expenses plus the balance of your mortgage, your children’s projected college expenses and then add on a reasonable percentage for emergencies. Make sure your family can survive and thrive even after you are gone.
Things are Tight, I Can’t Afford Life Insurance
Many people believe life insurance policies are far more expensive than they actually are. The truth is that term life insurance plans are in reach of nearly every Canadian.
The average cost of a $1,000,000 term life policy for a non-smoking 35-year-old is only about $36 a month. That’s less than most people spend on television every month.
Adding in such a small expense buys you a lifetime of relief. Knowing that if something were to happen to you the people you care about most would be taken care of.
The real truth is that you can’t afford not to buy life insurance.
I’m Not Healthy Enough to Get Life Insurance
This is one of the most common reasons people give when explaining why they don’t have life insurance. I’m overweight, I smoke, I drink too much. While these considerations will likely raise your rates you probably won’t be denied coverage.
Unless you have a preexisting condition that is highly likely to result in your demise it is usually possible to get coverage. Insurance companies generally base their policy offers on age, health, occupational hazards and lifestyle.
The conditions most people are worried about include diabetes, obesity, heart disease, high blood pressure, and depression. So long as you work with your agent and are upfront about everything it’s often possible to get coverage.
Planning Today Prevents Hardship Tomorrow
Now that we’ve debunked some of these life insurance myths and you know the most important life insurance facts you can see the benefits of getting coverage. Purchasing life insurance is one of the best things you can do to ensure your families future security and prosperity. Never assume that you’ll always be there to take care of them.
To learn more about your life insurance options or to get a quote for a policy, contact us today.