Life Insurance 101 Explained
You may be wondering why you need life insurance, whether you should buy a policy from someone else, or what is the difference between whole life policies and term insurance. These are all important questions, but when it comes to understanding life insurance, there are also a few common misconceptions. That’s why we take the time to answer these questions that most people who are curious about this subject have in our blog post on Life Insurance 101.
Myth #1: You Need a Life Insurance Policy for When You Die
This is one of the most common misconceptions about life insurance. Contrary to popular belief, you don’t need a life insurance policy just because you are dead. In fact, in many cases you can get a policy where your beneficiaries will receive the death benefit while you still live. The purpose of life insurance is to protect your beneficiaries financially should you die by covering any expenses related to your death, such as funeral costs and outstanding debts. So whether or not you die prematurely, life insurance can provide peace of mind for your loved ones and help protect them from debt that could have followed in the event of your early passing.
Myth #2: You Should Buy Life Insurance From Someone Else
In some cases, you may hear about a friend or family member who has life insurance, but that’s probably because they received a policy through their employer. In fact, it is not very common for people to buy life insurance on their own because it can be expensive and difficult to find the right company to work with. However, if you do decide to purchase life insurance on your own then you should be able to get a better deal. As long as you have a stable income and no pre-existing conditions, there are companies like ours that will cover you and give you the best deal available.
Myth #3: Term Life Insurance is Better than Whole Life Insurance
Whole life insurance can save you money, but so can term insurance. The main difference between the two types comes down to how they are paid out. With a whole life policy, there is always a death benefit included in the policy. The death benefit is paid out based on the original income needs after subtracting a certain amount of expenses and the policy payout amount. With term insurance, there is no death benefit included in the policy because these payments are made over time and don’t have any extra payments or guarantees built into them. So the overall amount is only what you initially paid for the term of the policy, leaving you to make up any additional costs.
Myth #4: There Are No Differences Between Term and Whole Life Policies
Whole life policies as well as term policies come with a variety of benefits that are often referred to as riders. The two most important riders are a loan rider and an investment rider. A loan rider is included in some term life insurance policies that allows you to borrow money against your policy so long as your beneficiary needs it. The investment rider includes things like dividends, interest rates, and return on funds invested in mutual funds or stocks underneath the policy.
Myth #5: You Should Buy a Life Insurance Policy With a Cash Value That Can’t Pass to Your Beneficiaries
If you are buying a life insurance policy and you want it to be paid out over your beneficiary’s lifetimes, then it is recommended that you choose a cash value policy. In this type of life insurance, the cash value is invested by your company or individual underwriter so that when your beneficiaries pass away they are able to access this money immediately instead of waiting through the probate process. This provides immediate liquidity for the beneficiary and also gives them more flexibility in terms of how they decide to use the money.
Myth #6: You Don’t Want to Make Too Many Life Insurance Changes Because It Might Decrease Your Benefits
Changing your life insurance policy is much easier than you may think. In fact, one of the main reasons why you should change from a term policy to a whole life policy is that it will save you money over time. The reason why you would want to make these changes is because they will increase the likelihood of your surviving and your beneficiaries receiving the death benefit. So when thinking about making any changes, always take into account if it will improve the chances for your policy payout in the event that something happens to you or not.
Myth #7: You Don’t Need to Pay for Life Insurance as Long as You Have a Family
When you get married, you may think that you don’t need life insurance anymore because you have someone who will look after your family. Although it is true that having someone to look after your family provides some protection against your passing, it doesn’t always follow through. In fact, about one in every eight families today lacks proper life insurance coverage. With all the different factors that can happen throughout people’s lives, it is important that you provide your family with peace of mind and protection. That’s why we suggest a life insurance policy for both you and your spouse.
As you can see, it is important to be aware of some common misconceptions regarding life insurance, but that does not mean it is impossible to understand. You just have to know where to find accurate information and read through the right sources on the internet. Life Insurance 101 was created to help answer some of these questions about this vital financial product so we hope that helps you in the long run.
If you’d like to learn more about life insurance, we recommend reading some of our other post that include everything from term life insurance to how much life insurance you should look for. So if you have any more questions about life insurance, please visit us at https://www.lifedomyinsurance101.com/ and feel free to contact us directly if you have any additional questions. We are happy to answer them for you today!
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Conclusion
The above 7 common insurance myths highlight some of the biggest misperceptions that people have regarding insurance policy costs, coverage, benefits, and more. We hope this helps both you and your loved ones alike as you consider purchasing life insurance or just staying current on your existing insurance policies.
As always, don’t forget to share with friends and family so they can learn from your mistakes. If you have any further questions feel free to ask us at [email protected] or 1-844-897-7247.