- 1: I'm best investing my money than buying life insurance.
When solely based on investments in early years of your life you're taking a significant large chance, especially if you have dependents. Should you die without life insurance coverage for the family there may be not one other method for your loved ones to get income upon your death once your assets are depleted. As well as many families and breadwinners I consult with regarding life insurance are curious about their families having the ability to maintain the standard of living these were accustomed to before the death of the breadwinner. If you are depending on your family to deplete their assets to be able to replace the income you had provided them then they may find themselves someday looking for extra cash beyond what your assets can provide them.
- 2: I'm single and don't have dependents, and so i have no need for coverage.
No matter your marital status or even the quantity of dependents you have, a single individual needs at least enough life insurance coverage to pay off any credit card debt left behind as well as medical and funeral costs (average funeral costs vary from $5,000 - $10,000 depending on location and services needed). Remaining uninsured, you might leave a legacy of debt of unpaid debt and expenses for your family to deal with. Additionally, life insurance coverage can provide men and women by having an choice to leave a legacy to some preferred charity, religious affiliation or other cause.
- 3: Twice the amount of my wages are all the coverage I want.
Think of it this way. Let's imagine you had been the sole breadwinner for your family and also you had a Ten year old child or two and you make $100,000 per year. Just how long do you consider your family could live on $200,000 upon your death? Considering your family have a mortgage to pay, food and garments to purchase along with a vehicle and home to maintain, those funds won't last very long at all, particularly if the family members have debt to pay off as well, along with funeral and medical costs they incurred because of your passing. An industry rule of thumb for how much coverage a breadwinner needs is 10 x your annual income. This could allow your family enough income to pay for themselves for at least 10 years. Look at the college tuition you would like your children to possess and much more coverage could be necessary to leave them an education fund. A income analysis is usually essential to determine the real amount of insurance coverage that must definitely be purchased to protect your family adequately.
- 4: I have life insurance coverage at the office, it's sufficient.
This depends on your marital and family status. If you're single then employer provided term life is probably sufficient. However if you are married with dependents or potentially require the coverage to cover any estate taxes upon your death then simply holding employer sponsored term life insurance coverage isn't sufficient. One more thing to consider is when you leave your work most employer sponsored life coverage is not portable. If your next job you acquire does not provide life coverage then you will be looking for an individually owned policy. The problem then is when old are you currently now? You have been depending on life insurance coverage from work and now you are 10 years older. The older you receive the more expensive life insurance coverage gets, additionally the older we get the much more likely our overall health will diminish which means our insurability will decline as well leading to rate increases. Take advantage of an individually owned life insurance coverage while you are still young and healthy.
- 5: Always invest in the return-of-premium rider (ROP) on your policy.
This is absolutely untrue. It depends on your preferences and budget. Whether it falls inside you or perhaps your family's finance budget it should be thought about. A cash flow analysis will disclose whether you could benefit from investing the quantity of the word rider elsewhere versus including it in the policy.
- 6: Only breadwinners need life insurance coverage.
This is absolutely untrue especially nowadays. The estimated worth of a homemaker's annual income has been said to be approximately valued at $100,000 per year. A homemaker has taken on the role of nanny/babysitter, house cleaner, cook, chauffeur, wife and at times teacher. A breadwinner could be in dire straits to understand the homemaker is no longer there to deal with the house and kids while at the office. If however the homemaker has adequate insurance coverage and happens to die then your breadwinner will be able to afford to purchase daycare services to watch the kids while at work along with a maid to wash the home while busy taking care of the kids. This income would be a life-saver for any single breadwinner with dependents.
- 7: Variable universal life plans are superior to straight universal life due to their long-term growth potential.
Due to variable universal life (VUL) policies having non-guaranteed interest rates there is a potential for a VUL policy to under-perform the guaranteed rate of interest of the universal life (UL) policy. However however do in order to the VUL policy fluctuating using the sell it off also has a potential to amass more money value than the usual traditional UL policy by achieving a greater rate of interest compared to guaranteed interest of a UL policy.
- 8: Buy term insurance and invest the difference.
This depends. If you do not hold many assets and also have no requirement for permanent life insurance coverage then sure, just buy term coverage. HOWEVER...for those who have a need for permanent insurance coverage such as to take care of covering your estate taxes or leave a unique needs child with income, then term insurance won't cut it.
- 9: I absolutely must have life insurance no matter what.
This depends. If you have no dependents or debt and have accumulated sizable assets the chances are you won't need insurance coverage. The concern in that case would be any medical and funeral related costs you may be leaving behind for your family to deal with. However again, for those who have accumulated sizable assets then that can be used to deal with those final expenses.
- 10: The cost of my premiums are tax deductible.
Unfortunately, generally this is true. Personal life insurance premiums are NEVER deductible. However, if you are an employer and buy it as an advantage for the employees, compared to premiums is deductible. However, a few of the premiums might be taxed at the employee level.
In conclusion the above mentioned misconceptions I've listed regarding life insurance coverage are lots of of the extremely questions the general public and many of my clients often ask. Main point here if you aren't single without dependents or have amassed a lot of assets the need for life insurance coverage is very real and incredibly essential for the ability to earn money of ones own and dependents.