Life Insurance is one of those things that some people would just rather not talk about and mostly because they don’t really understand how it really works. During my career in financial services, I have learned quite a bit about insurance and most recently I have learned much more about the power of life insurance.
I considered myself financially savvy, but given that I have had to unlearn what I thought I know about life insurance, I wanted to expose some myths about life insurance that cause people to consistently make the wrong decisions when seeking a life insurance policy.
Myth #1 – You Need to Die to Use Your Life Insurance. While your life insurance should be structured to make sure you have a death benefit, focusing on the death benefit aspect of the policy actually just drives the cost up. If you get the right kind of life insurance, you can actually accrue cash value and use this as a financing vehicle which will save you lots of money on interest over your lifetime.
Myth #2 – Term Insurance is better than Whole Life Insurance. The truth is that term insurance premiums may be cheaper than whole life insurance premiums, but the problem is that it is only for a specific period. Even worse, the term under which you can keep this type of insurance is the period in which you are least likely to die. Trust me, if the insurance company thought you would die, they wouldn’t issue the policy. Whole life guarantees that you will have life insurance when you need it. The right kind of whole life insurance, also helps you live a better lifestyle because you will have access to more financial resources through your whole life policy, provided you use am insurance company that offers the features you need.
Myth #3 – You Don’t Need Life Insurance if you are Young. This could not be further from true, especially if you have dependents. Being insured is about being prepared for the unexpected. Many young people with families die without insurance because they didn’t think they needed it. Also, keep in mind that the underwriters want to know that you are healthy or they won’t insure you anyhow, so you are more likely to get approved if you are young and healthy. Lastly, even babies can be insured. In fact, if you insure your baby with the right kind of whole life insurance policy and fund it for about 22 years at $2,000 per year you would be amazed to know that at the age of 75, your child could have over $4,000,000 in cash value in their policy. This means they could live on about $225,000 for the next 25 years and still leave a death benefit of $8,000,000 (this is a sample illustration for educational purposes and your specific numbers will vary).
Myth #4 – Life Insurance is Expensive. If you think life insurance is expensive, let me give you a different perspective. Without going into the dreadful details, just imagine a family who loses their uninsured sole provider to an early death. Now do you want to know what expensive looks like? Forget paying for the funeral (at a cost of up to $10,000), but think about how the family will continue to pay for household expenses such as the mortgage, utilities, and food. Oh, and let’s not forget what a college education costs for the kids. So, given that the money you put into the policy you can actually get back out of the policy; does life insurance really seem expensive?
Myth #5 – Life Insurance is a Poor Investment. As with any place you can put your money, the more educated you are, the better return you will get. Term Life insurance is a poor investment because less than 1% ever actually use it, and because there is no recovery of the money you spend on it. Whole Life Insurance can be a great investment if done correctly. If you would like to learn more about how to use a whole life insurance policy and gain a great return on your money, contact me and I will share with you send you a self study program where in 45 minutes of less you can learn more about life insurance than your agent knows.
I hope this has been helpful. If you would like a review of your life insurance policy, please contact me to schedule a phone consultation.