A guide to life insurance: common misconceptions and little-known facts

Are you one of the many Americans who view life insurance as an unaffordable luxury? We get it. After all, it is easy to ignore thoughts about life,  death, and inheritance when you’re feeling fit and healthy.

Life insurance isn’t simply a means to protect our loved ones if the unthinkable happens. I fact, there are plenty of different life insurance products on the market that offer a range of fantastic benefits, one of which is likely to suit your personal needs and financial situation.

To clear up some common misconceptions about life insurance and to let you in on some little-known facts, we’ve put together a quick guide to this much overlooked financial product. In doing so, we aim to help make your financial life that little bit easier and to help you make the right decisions for you and your family.

Busting myths about life insurance

There are a considerable number of myths surrounding life insurance, many of which can hinder your decisionmaking efforts. We’ve debunked some of the most common below:

Myth #1: I don’t need life insurance as I am single with no dependents

Don’t forget that single people should have enough life insurance to cover their personal debts, medical bills, and funeral bills. Failure to obtain a policy could leave some of your family members to pick up the financial pieces once you are gone. If you’re having trouble deciding who to leave your wealth to, remember that charities and other good causes are worthwhile beneficiaries to consider. Knowing that your money is going to a worthy place makes for a fulfilling legacy.

Myth #2: Only primary household earners need to take out life insurance

While the need for breadwinners to take out life insurance is obvious, many people fail to realize the costs to replace a stay-at-home provider. Insuring against the loss of a person who is responsible for the daily household activities is important to the survivors in the face of loss.

Myth #3: Life insurance is a waste of money. Investment is key

Until you can be assured that you have enough financial assets to cover your family needs, debts, final expenses, and etc., opting for life insurance is a prudent choice. Those that depend purely on investments during the early years of their lives are taking a considerable risk, particularly if they have young dependants to consider.

This is not always the case. If you’re single with no dependents, then employer-provided coverage may suffice. However, it is important to be aware that additional coverage may be warranted due to your specific family needs. Also, keep in mind that individual coverage may be less expensive than you expect.

A few perks of life insurance you may not be aware of

Now that we’ve debunked a few myths, we’d like to make you aware of some perks of life insurance of which you may not have been aware. With the right policy, you could benefit from the following:

1. Life insurance could cover care expenses

Some life insurance policies allow you to add-on special coverage for long-term care. While this inevitably comes at a higher premium than a standard life insurance policy, it has the potential to be more cost-effective than paying for two separate policies for both life and long-term care. This arrangement can be particularly useful if you’re unsure whether you are going to need long-term care insurance.

2. Life insurance could offer benefits if you are terminally ill

Many life insurance policies come with what are known as living benefits. Although the details vary between specific plans, these benefits typically allow people with a life expectancy under twelve months to receive some of their death benefits early.

3. Life insurance could help your child through college

As most parents are well aware, the cost of college is becoming increasingly unmanageable. Fortunately, some life insurance providers allow policyholders to take out loans from permanent life policies to pay for tuition payments. Perhaps surprisingly, the guaranteed loan rates offered by these policies can be better than those offered by many student loans. Policyholders may also prefer to pay the money back into their life insurance policy rather than paying interest to the government or a bank.

4. Disabled policyholders could enjoy benefits even if they are not terminally ill

Some insurers allow policyholders to benefit from accelerated death benefit payments even if their illness is not terminal. Critical or chronic illness riders allow insured access to their death benefit should they become disabled or experience a debilitating event such as a stroke or a heart attack.