Are You Making These Life Insurance Mistakes?
There are many common misconceptions about life insurance, which isn’t surprising given that over half of consumers don’t understand how it works. Many people overlook life insurance because they believe in some common myths or because they don’t think it’s important for their current stage of life. However, not having life insurance when they need it most can devastate peoples’ finances. The following are common misconceptions about life insurance.
Employer-Provided Insurance is Sufficient
This misconception is wrong on two counts. First, employer-provided life insurance is usually equal to one to two times the employee’s annual salary. Sometimes, employers provide the option to buy up to six times the employee’s salary, but most people will need up to eight times their income to provide for dependents. Some experts suggest 10-12 times their income.
Second, even if employers offer sufficient coverage, they often sever coverage when the employee leaves the company. This means the employee has zero coverage when they are likely older and less healthy than when they first started working for the company. Some companies have the option to convert the coverage to an individual policy, but this will cost the employee more than if they had obtained a policy on their own in the first place.
Only the Breadwinner Needs Coverage
Many married couples think that only the person bringing in the majority of the money needs life insurance. For example, they may assume the stay-at-home parent doesn’t need coverage because they don’t bring in any income. However, they provide numerous services that would otherwise cost money such as providing childcare, picking kids up from school, transporting children to sports practice, etc. Not only that, but the working spouse would want to take time off work to help his or her household adjust to their loss.
The Young and Single Don’t Need Life Insurance
Many people believe that if they aren’t supporting anyone (i.e. a child, spouse, or aging family member), then they don’t need life insurance. However, this is flawed logic. When an individual passes, there are expenses associated with it. The individual’s family must pay for a funeral, burial, remaining medical expenses, etc. A life insurance policy will help cover those costs. Plus, investing in life insurance at a young age means locking in much lower premiums.
These are just some of the most common myths surrounding life insurance. Unless you have enough income and assets to cover your expenses in the event of your passing, you need life insurance. The Reilly Group can help answer any questions you may have. Contact us today to learn more.