- 1: I'm better off investing my money than buying life insurance.
When solely based on investments in the early years of your life you're taking a significant large chance, especially if you have dependents. Should you die without insurance coverage for your family there might be not one other means for your family to acquire income upon your death when your assets are depleted. As well as many families and breadwinners I talk to regarding life insurance are interested in their own families being able to keep up with the quality lifestyle they were used to before the death of the breadwinner. If you're based on your loved ones to deplete their assets in order to switch the income you'd provided them they may find themselves someday in need of extra cash beyond what your assets can offer them.
- 2: I'm single and do not have dependents, and so i have no need for coverage.
Regardless of your marital status or the quantity of dependents you've, a single individual needs a minimum of enough insurance coverage to pay off any credit card debt left out in addition to medical and funeral costs (average funeral costs range from $5,000 - $10,000 depending on location and services needed). Remaining uninsured, you may leave a legacy of debt of unpaid debt and expenses for your family to cope with. Additionally, life insurance coverage can provide single people with an option to leave a legacy to a preferred charity, religious affiliation or any other cause.
- 3: Twice the amount of my wages are all of the coverage I want.
Consider it by doing this. Let's say you had been the sole breadwinner for the family and you were built with a Ten year old child or two and you make $100,000 per year. How long do you consider your family could live on $200,000 upon your death? Considering your family will have a mortgage to pay, food and clothes to buy along with a vehicle and home to keep, that money won't last very long at all, especially if the family has debt to repay too, in addition to funeral and medical costs they incurred because of your passing. An industry rule of thumb based on how much coverage a breadwinner needs is 10 x your annual income. This would allow your family enough income to cover themselves for at least Ten years. Look at the college tuition you would like your kids to have and much more coverage would be necessary to leave them instruction fund. A income analysis is generally necessary to determine the real quantity of insurance coverage that must definitely be purchased to protect your loved ones adequately.
- 4: I've life insurance coverage at work, it's sufficient.
This relies in your marital and family status. If you're single then employer provided term life is most likely sufficient. If however you're married with dependents or potentially require the coverage to pay for any estate taxes upon your death then simply just holding employer sponsored term life coverage isn't sufficient. Another thing to consider is when you ever leave your job most employer sponsored life coverage is not portable. In case your next job you acquire doesn't provide life coverage then you will be in need of an individually owned policy. The issue then is how old are you now? You have been depending on life insurance coverage from work and you are Ten years older. The older you get the greater expensive life insurance gets, in addition the older we obtain the much more likely our health will diminish which means our insurability will decline as well resulting in rate increases. Make the most of an individually owned life insurance coverage while you are still healthy and young.
- 5: Always purchase the return-of-premium rider (ROP) in your policy.
This is absolutely untrue. It depends in your preferences and budget. Whether it falls within you or perhaps your family's finance budget it should be thought about. A cash flow analysis will reveal whether you may gain advantage from investing the amount of the word rider elsewhere versus including it within the policy.
- 6: Only breadwinners need insurance coverage.
This is absolutely untrue especially nowadays. The estimated value of a homemaker's annual income has been said to be approximately worth $100,000 each year. A homemaker has taken around the role of nanny/babysitter, house cleaner, cook, chauffeur, wife and also at times teacher. A breadwinner would be in dire straits to learn that the homemaker is not there to deal with the home and children while at work. If however the homemaker has adequate life insurance coverage and happens to die then the breadwinner will be able to afford to pay for daycare services to look at the children while at work along with a maid to wash the home while busy taking care of the children. This income will be a life-saver for any single breadwinner with dependents.
- 7: Variable universal life policies can be better than straight universal life due to their long-term growth potential.
Because of variable universal life (VUL) policies having non-guaranteed rates of interest there is a potential for a VUL policy to under-perform the guaranteed interest rate of a universal life (UL) policy. However however do to the VUL policy fluctuating using the market it also has a possible to amass more cash value than the usual traditional UL policy by achieving a greater rate of interest compared to guaranteed interest of the UL policy.
- 8: Buy term insurance and invest the main difference.
This depends. If you don't hold many assets and also have no requirement for permanent life insurance coverage then sure, just buy term coverage. HOWEVER...if you have an excuse for permanent insurance coverage for example to take care of covering your estate taxes or leave a unique needs child with income, then term insurance won't cut it.
- 9: I absolutely should have life insurance coverage no matter what.
This relies. If you have no dependents or debt and also have accumulated sizable assets then you probably won't need insurance coverage. The concern if so could be any medical and funeral related costs you might be leaving behind for your family to take care of. However again, if you have accumulated sizable assets then you can use to take care of those final expenses.
- 10: The cost of my premiums are tax deductible.
Unfortunately, in most cases this is true. Personal life insurance coverage premiums will never be deductible. However, if you are an employer and purchase it as being an advantage for the employees, compared to premiums is deductible. However, a few of the premiums might be taxed in the employee level.
To conclude the above misconceptions I've listed regarding life insurance are many of the extremely questions the general public and lots of of my clients often ask. Bottom line if you aren't single without dependents or have amassed a lot of assets the need for insurance coverage is very real and very essential for the financial well being of your family and dependents.