Top Myths Surrounding Life Insurance CompaniesArticle Posted by Expert Author: Adam Foley on 09/03/2013
A lot of people think they know all there is to know about life insurance companies, however, most of what they think they know is actually a myth. The truth is that this type of coverage is just like any other insurance policy, which means there will come a time when you will use it but in most cases that won’t be for a long time.
Below are some of the top myths to help you understand life insurance a little better.
Top Myths Debunked
Employer Coverage Is Enough
his may or may not be true. For the employee who is single and earning a modest income, coverage from an employer may be sufficient. But an employee with a family that includes a spouse and children may need additional coverage where term policies don't meet their needs.
Premium Costs Are Deductible
Unfortunately, this is not true in most cases. Personal life insurance costs are almost never deductible. The only case where they would be is when the owner of the policy is self-employed and the coverage is being used for business asset protection.
Without Kids You Don’t Need Coverage
Did you know that the biggest reason people get a policy is to cover their debts, not for a continued luxury lifestyle for their family? The truth is that life insurance is used more to cover any debts that you have for the time being, not just for children and family members. Being uninsured will mean that your family or executor will be left to decide what to do. If you are low income, having life insurance can allow you to leave your legacy to a charitable organization of your choice.
Buying Term Coverage And Investing The Difference Is Best
When comparing term coverage with permanent life insurance policies, it becomes easy to see how high term coverage can get as time goes on. If you know that you want to be covered when you pass away, permanent coverage is likely your best choice. The total amount paid for a permanent policy, although more expensive, will very likely be much less than having to pay ongoing premiums in a term scenario.
Twice Your Salary Is Adequate
There is no 'one size fits all' where it comes to coverage. Everyone's situation will be different. Many factors go into how much coverage is ultimately chosen. As well, you may wish to be able to pay off debts like a mortgage in order to take the financial burden from your family should you pass away. One of the most accurate ways to calculate how much coverage you need is to do a cash flow analysis.
Foregoing Coverage Altogether And Investing Instead Is Smarter
Experts advice that coverage of some sort is needed at least until you have accumulated enough assets to break even. For example, if you have accumulated liquid assets totaling one million dollars, this is the point where you can choose to reduce or discontinue a $1 million dollar policy. Not getting coverage and instead relying on your investments for coverage could very well see those investments depleted by the time your family needs to be provided for.
Every Type Of Term Coverage Should Have An ROP Rider
A return-of-premium rider, or ROP is not necessarily a cost-effective solution. This is what a number of financial planners may advise. The decision to include an ROP rider will depend on how much risk you think you can tolerate, as well as any other goals you have for your investments.
This topic is always going to be foreign to most people and that is why you need to take the time to learn more about it. Comparing what life insurance companies have to offer along with their ratings is a good first step.
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