John Stuart
In the life insurances environment, people’s indecision in the purchase of a life insurance occurs due to certain contextual factors – myths. The choice of life insurance is determined, in many cases, by certain beliefs or prejudices taken from various stories that have become myths. Although life insurance is considered to be an expensive product or that it is a not a personal necessity, we need to look at a much more objective spectrum of long-term prospects in order to understand life insurance characteristics.
Let me show you below some of the well-publicized myths about life insurance and the principles against them:
Myth #1: It can’t happen to me.
It is normal and good for us to be optimistic and think that something bad cannot happen to us now or ever. That’s why we may not consider life insurance. True, it is very likely that death may not occur when you are active, healthy and working, this is also why life insurance is cheaper for young and healthy people. But it is important for you to understand that you don’t get assured just to provide for all contingencies. You do it for the effect that a tragic event will have on your family or your dear ones. This is how you can protect them financially after you will not be around anymore.
Myth #2: I don’t need life insurance if I’m single and independent.
Probably if you are all independent, without debts and a large bank account enough to cover your medical expenses in case of emergencies, surgeries or caused by death ones, life insurance may not seem necessary. However, if you have someone depending on you (mother, father, grandparent), you can and should consider applying for a life insurance, it would be a smart investment. Your family is your greatest responsibility and life insurance can guarantee a safe future.
Myth #3: I need life insurance only if I am the one that brings the biggest amount of money in the house.
Indeed, the loss of the financially support of the family will have a major impact on the financial security and will ultimately influence its later living standards. But the cost of losing that family member who stays at home and cares about raising children, cleaning, cooking or earning less money, is very important to consider, even though it is often overlooked. If we collect the monthly salary of a babysitter, a housekeeper and a cook, we will definitely get an idea of this family member’s value.
Myth #4: A life insurance that has twice the value of my annual salary is enough.
Most often, when choosing the insured amount, we multiply by at least 3 the annual salary of the family member that earns the biggest amount of money; depending on the specific needs and situations of each person. If you are young, married, have a home and a child, it is suitable for you to consider 3-7 times your annual income. If you have more children, have debts and do not want to leave them on the shoulders of your loved ones, you could multiply your annual income by 7-10. However, life insurance – the insured amount at death – must be sufficient to cover both the immediate expenses of the insured event and the subsequent family financial need for a certain period of time after that.
Myth #5: Term life insurance attached to a credit card is safe and enough.
At first sight, a credit card insurance sounds perfect. For a (apparently) small amount of money of debt, life insurance pays off the credit card balance owed at the time of the cardholder’s death. Why is it bad idea? First, other insurance policies are generally cheaper. Especially term life insurance costs less and provides better coverage than a credit card policy. And if you have 2 or 3 credit cards, you will need 2 or 3 separate insurance policies to be sure you are totally covered. Second, other forms of insurance are so much more flexible and customized on your needs. It is worth mentioning here that you are the one who best knows your needs and the level of protection you need.
This being said, I hope you will consider purchasing a life insurance soon enough. It is not a tangible good, it is not a phone or a laptop you can say is expensive or cheap. It is sold in flexible packages, which means that its price is directly related to the coverage it offers. Maybe you think it’s too much, but maybe you didn’t choose the right policy. My strongest recommendation when considering a life insurance is to have a discussion with a financial consultant that you trust who will direct you to the insurance that suits your needs.
