Don't Get Buried in the Sand by Common Life Insurance Myths
By: Meagan Baron
September 9, 2019
September is Life Insurance Awareness Month, so we thought that a nice myth buster article would be a fun treat for all of you to help spread awareness!
As we all know, life is a wild rollercoaster full of ups and downs, twists and turns. When it comes to your life and the lives of those you care about, more control and safety nets in place can help you design the life you want. Things will always happen, but you can give yourself more security knowing that if the unexpected happens, you have a backup plan. Being buried in the sand by mountains of misunderstandings about life insurance can keep you from the exact opportunities you have always envisioned for your future.
Life insurance doesn’t have to be as gruesome as it has been portrayed for decades. A common viewpoint is that it should be called death insurance since you are paying into something that is reaped after you die…A whole new meaning to Grim Reaper, huh? Well, that does not have to be the case. Read on for more information about life insurance and how you can redefine its bad rep.
6 Common Life Insurance Myths and Their Truths:
Myth 1: All life insurance policies pay out only after you die.
Fact: Think again…Yes, most typical life insurance policies only pay out money to the beneficiaries (usually a spouse or family) if the policyowner dies, but that doesn’t have to be the case. Life insurance can protect you and your income in case you were to get a severe terminal, critical, or chronic illness and were unable to provide for yourself and/or your family like you used to, whether it be in terms of money from a job and/or actions around the household like a stay at home parent. Yes, there is such thing as disability income insurance, but that is typically very expensive. Give us a call for more information on a life insurance policy that will give you (1) benefit at death, and (2) “full living benefits” that pay out while you are still alive in the event that you have a medical crisis in the form of a critical, chronic, or terminal illness. Almost everyone has known someone with cancer of some kind. Most people (67%) who suffer a medical crisis end up declaring bankruptcy because they can’t afford the high medical bills and lost income from their jobs. Life insurance can help protect you and your family.
Myth 2: If you have “living benefits” on your life insurance policy, you will be financially covered in case of critical, chronic, or terminal illness.
Fact: NO! Not all policies with “living benefits” cover financial protection in the case of critical or chronic illness. While most policies have “living benefits” for terminal illness, only a few life insurance companies have “full living benefit” policies that cover all the three types. Illness is a common occurrence—so common in fact that the leading cause of bankruptcy and small business failure in the US is due to critical or chronic illnesses. Many of us know someone with a critical and chronic illness. Some of the common ones include invasive cancer, paralysis, major organ failure, Alzheimer’s, dementia, heart attack, stroke, and other medical emergencies that lead to long-term care. When it comes to your financial stability, and that of your family and employees, do you want to take the gamble? (We are guessing the fact is that you don’t!)
Myth 3: Name brand is better life insurance.
Fact: Not Necessarily. Name brand is not always better. In fact, more times than not, name brands are putting more effort into marketing to build their name than into shaping the best policies for their clients. Did you know that the cost for identical policies with non-brand name companies can be 20-45% less? And, the lower cost does not automatically mean lower value. The reality is that some of those life insurance policies with lower costs come with "full living benefits” at no additional charge that can prevent bankruptcy in the event of a severe terminal, critical, or chronic illness. Unfortunately, none of the big brand-name life insurance companies offer policies with "full living benefits,” even though they charge much more for their ordinary policies. Don’t get hung up on the fancy bells and whistles or you might lose sight on what really matters: getting you covered the best way possible. Memorable mascots, funny commercials, and clever jingles won’t be there to cover you if you are ever in need.
Myth 4: As you go up in age, your policy premiums will go up too.
Fact: FALSE! While it is true that life insurance costs go up the older you are before you get the policy, once you have it, your increase in age will not cost you more. Yes, if you were to buy a life insurance policy at age 45, you would pay more than you would of if you had bought it a decade earlier…BUT, once you get it, your premium rates are set for life. Life insurance companies know that you will age. So, they took that into account and made it so that instead of paying low in your younger years, and higher in your golden years, from the beginning of your policy, you are paying an average rate.
Myth 5: Life insurance is only for older people or people with kids and/or spouses
Fact: Wrongo. Anyone can get hurt. Anyone can need help. Life insurance is a way for anyone to be able to protect themselves in addition to the ones that they love. You don’t need to be a certain age or have a certain demographic to need the security in case an accident or unpredictable health problem were to happen.
Myth 6: Life insurance is always EXPENSIVE
Fact: A BIG N-O! It’s not always expensive. Most of the time, policies are dirt cheap. Most adults don’t have a problem spending $25+ for dinner or two movie tickets at least once a month. Well, here’s the amount of life insurance with “full living benefits” that a 30-year-old in good health (who doesn’t use nicotine) can get: $250,000 of benefits at the fixed price (does not increase) of $11 a month for 10 years. Make it $1,000,000 of benefits for $24 a month. Those prices are awesome! …But, the thing is, most 20-30-year-olds don’t think they need life insurance until they have a family to protect. However, if you have a mortgage, a dual income budget, or a large student loan, then having life insurance is a wise investment and makes great sense as financial protection that pays off all debt so the remaining spouse/partner isn’t forced to move out because they can’t afford the payments on their own income, or if married, doesn’t become legally responsible for their spouses debt.
More Major MYTHS to Debunk:
Myth 7: Finding the right coverage is hard, time-consuming, an overwhelming. (We can take you through an easy process where you can ask any questions you might have!)
Myth 8: Life insurance is not needed for people who are…
- Not parents
- Stay at home moms/dads
Not the household breadwinner
Bottom line: Accidents and unfortunate circumstances can happen to anyone at any time. Everyone would be better off with a financial safety net.
Myth 9: People with already existing health issues cannot get life insurance, period. (Life insurance is not obtainable by just those with perfect health. We can help you investigate your eligibility.)
Myth 10: Having a savings account is better than life insurance. (Savings accounts are great! BUT they do not replace life insurance policies.)
Myth 11: Life insurance through your work is good enough. (Life insurance through your employer is a nice bonus, but it is not typically a great policy. It also doesn’t follow you if you leave the company. Personal insurance policies tend to be better quality and more secure.)
Myth 12: If you renew your term life insurance policy, you will have the same premium. (Term life insurance premiums (costs) increase with age. There are two types of term policies regarding premium rates: (1) fixed premium means the price stays the same every year for the length of your term (10,15,20,25,30), and (2) increasing premium means the price goes up every year or every 5 years. Renewals can be identical to the original policy, but they will have higher premiums. So, renewals are essentially like a continuation of coverage with higher prices. They take in account your age at the renewal, not at the age of your first term with the policy.)
Myth 13: You can always renew a term life insurance policy. (At the end of a term, your health is reevaluated. Some companies reevaluate by you showing evidence of insurability, which is usually a health form you sign noting any changes in your health since you first got your policy. However, some companies, including the top ones with “full living benefits,” allow you to renew your policy no questions asked and at the same health class, even if your health has declined. Sometimes a decline in health will not allow you to renew.)
Face the FACTS Further:
Fact 7: Risk management is an important part of financial planning. For example, most people see the reason for having fire insurance that pays to rebuild your house in case of a fire. They don’t really think or plan on having a massive fire, but they are willing to pay for that coverage, just in case they have one. The fact is, the chances of having cancer or another critical or chronic illness are much higher than the probability of having your home burn down.
Fact 8: Treatment for cancer usually involves surgery, radiation and/or chemotherapy. These treatments can make a person so sick and weak they cannot work. Usually treatment lasts for months and sometimes a year or more. What happens financially when you don’t have income for that length of time? Unless you have incredibly great benefits at work that cover both short and long-term disability income, you’re left with borrowing against your assets, either with home equity loans or raiding your retirement savings or your kids’ college savings. A good life insurance policy can help protect you against situations like this.
Fact 9: Life insurance with “full living benefits” is virtually unknown to agents and consumers. Most companies, including all the big ones that advertise in the media, don’t have a policy that includes benefits for critical and chronic illnesses. From our experience in the insurance world, once people understand the value of these benefits, they usually decide to get this type of life insurance. You have to remember that just because people do not know about this insurance does not mean that it does not exist. The tree does make a sound when it falls in the forest even if there is no one there to hear it.
Fact 10: Life insurance policies are not limited to just you. You can get life insurance for yourself, your family, and/or your business partners.
Fact 11: There is a life insurance policy that can give you all your premiums back. A Return of Premium (ROP) Life Insurance policy is a safety net for your family if you pass away and a refund opportunity if you outlive your policy. It does cost more than an average policy, but it is worth looking into to see if it is right for you. We are more than happy to help answer any questions.
Fact 12: Even though many life insurance policies have “living benefits,” they typically are just for terminal illness. Many policies are missing two benefits that are also very important—critical and chronic illness coverage. Yes, many policies provide financial protection in the case of a terminal illness, but there is usually more to the pie than what is cut out for you. Why settle for two when you can get all three? You can have your pie and eat it too.
Fact 13: “Full living benefits” in policies are hard to come by, and they typically have a max coverage of one to two million. Two million is the max for death benefit, but only one million can be used for “full living benefits.” Only a few life insurance companies provide full financial protection in cases of critical, chronic, or terminal illness.
Fact 14: Critical and chronic illnesses happen much more often than terminal illnesses. But, the need for life insurance protection in either of these situations is still dire.
Fact 15: Long-term care is sometimes needed in the event of an illness or accident. That can get spendy in many areas of your life—rehabilitation, lost wages and/or career opportunities, housing accommodations, transportation, hygiene care, and nurse aids to name just a few.
Fact 16: Every life insurance policy should be based off of your needs and compared to the costs and benefits of other policies. Mosaic is here to help you.
Switching from your current life insurance policy can be done simply and quickly. Creating an entirely new policy is also possible without major stress. It does not need to be a confusing hassle that leads to a headache. For more details, or to see what actions steps you can take next, call us at 425-320-4280, or email him at firstname.lastname@example.org .