Your parents told you to eat your peas and carrots, but you didn’t. Your teachers told you to study hard, but you slacked off. And now people are telling you to buy life insurance, and you don’t think you need it. If you ask 10 different people on the street why they don’t have life insurance, you’re likely to get 10 different excuses, everything from I’m too young, to it’s too expensive and I already have it through my employer. You’re wrong! Everyone needs life insurance even if just a minimal amount of coverage.
There are so many myths and misconceptions about life insurance, so it’s not surprising that people have been so misled. Unfortunately, many people don’t even think about it until it’s too late. Don’t let this happen to you. By understanding the myths and realizing the truths, you’re going to be a better consumer and see the need for life insurance.
Myth #1: I’m Young and Don’t Need Life Insurance
This is one of the most popular excuses among young adults, but the reality is no one can escape the cost of final expenses, unpaid debts and medical bills. The only question: Which part of that cost are you willing to protect and pay for? One of the smartest things a young adult can do is buy himself a life insurance policy while he’s young. If you buy it when you’re young and single with a low monthly cost, you’ll benefit in the long run. A very extensive study of roughly 113 billion people shows that 100 percent of them die. The only problem with that study is we don’t know when. As a veteran in the life insurance industry, I’ve seen many tragic incidents where someone in his 20s or 30s dies unexpectedly. The financial mess that’s left behind is a nightmare.
Myth #2: It’s Better to Invest Your Money Than Purchase Life Insurance
Some people believe it’s better to invest their money and watch it grow. One of the main reasons to purchase life insurance, however, is to protect any investments. Laws are constantly changing for estate planning, and the need for life insurance coverage is more important than ever. It’s not uncommon for families to be left behind and forced to liquidate their investments because of a lack of life insurance coverage. Even if you can’t afford a permanent policy, the least you should do is protect your family and investments with a 30-year term.
Myth #3: My Employer’s Life Insurance Policy is Plenty of Coverage
Perhaps you receive a life insurance policy through your employer’s plan, but does it offer sufficient coverage? Usually it doesn’t! The other thing to remember is that employment nowadays is anything but a sure thing, regardless how long you’ve been with an employer. Having your own policy outside of work protects you regardless of what your company decides to do.
Myth #4: Only Breadwinners Need Coverage
The reality is most two-salaried families aren’t going to be able to get by on a single income. If you’re currently in a two-salaried family, ask yourself if it would be possible to survive on only one income? If the answer is “no,” you need to protect your family’s future in the event of a tragedy. If you are a one-income family, don’t overlook the cost of such items like child care, transportation, food, education costs and more. Let’s assume the cost of a homemaker is $50,000. Multiply that number times the amount of years your kids will be under your financial support, and it will determine how much insurance the homemaker needs.
Myth #5: Inflation has Driven Up The Cost of Life Insurance
A lot of people believe that life insurance is more expensive today because of inflation. However, this is one industry where the usual rules of economics don’t apply. Your life expectancy, gender and some other factors will determine the cost of life insurance. Average life expectancy has changed in the last 40 years and has increased significantly. Males have added roughly nine years to their lives while females have added six. These numbers help make the cost of insurance less expensive.
The bottom line: Don’t be naïve and don’t listen to the myths and misconceptions about life insurance. Protect your loved ones and be prepared. Life insurance offers peace of mind that things will be taken care of when you’re no longer here.
Patrick Bet-David is a successful entrepreneur, author and financial literacy crusader committed to helping people get more out of life. His intriguing perspective on opportunity is colored from his experience as a young immigrant escaping war-torn Iran in the late ‘80s. He embodies a true rags-to-riches story that saw him first serving in the U.S. military before breaking into the financial services industry. Before turning 30, Patrick started a financial services marketing organization, PHP Agency (short for People Helping People), one of the fastest growing companies in the U.S. His latest accomplishment is the launch of a financial literacy website. GoAskNewton.com is a noncommercial website designed to help educate people on all things related to personal finance in a fun, entertaining way. The site uses simple tools and weekly finance lessons all presented by Patrick’s alter-ego “Newton” – a smart and friendly dog who is “financial literacy’s best friend.”
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