It's been a rough year, with multiple friends losing spouses or parents unexpectedly. While I am grateful for the generosity of friends and peers who start GoFundMe accounts, I can't help but think that the people we just lost did not intend to leave their loved ones dependent on donations. Maybe they thought life insurance would be too expensive. Perhaps they just hadn't quite gotten around to it quite yet. I'm sure they didn't expect to die so suddenly; who does?
To clear the air, here are 5 common misconceptions I see people having about life insurance.
Myth 1: I'm not going to die young.
This is not so much a myth we would actually admit out loud, but it's one many of us subconsciously believe. We know it's important, but we're probably not going to die young, so why not spend that money doing something fun? It could also be said that your house probably won't burn down, and you probably won't get in a car accident, but we still buy homeowner's and auto insurance, right?
Myth 2: Life insurance is too expensive
For the average healthy adult, there are very affordable options available. To get specific quotes, you should talk to your local financial advisor or insurance agent. Just keep in mind that you may be able to get the right amount of coverage for you for close to the cost of a meal out.
Myth 3: I have enough life insurance through work
Employer-sponsored life insurance is a great thing, and can sometimes be more cost-effective, especially if you have a medical condition that could affect your premium. However, the average tenure at a job is about five years and most people don't take their life insurance with them. They're probably not thinking about life insurance while they're switching jobs, so there may be a gap in coverage, if the new employer even offers any at all. By the time the person realizes their need for insurance down the road, they'll be older, and potentially have newly diagnosed medical conditions, both factors that will make their insurance coverage more expensive.
Myth 4: I only need enough to pay off the mortgage
While this is a common approach to life insurance, it probably isn't enough. Does 100% of your income go towards your mortgage? (I hope not!) Truth be told, your income probably also helps with things like putting food on the table, buying clothes, going on vacation, paying for your phone plans... hopefully it's also going toward goals like retirement and maybe sending your kids to college. None of those expenses or goals go away if you die, and even if you pay off your mortgage, you'll still have homeowners insurance and property taxes to pay. So while aiming to pay off the mortgage is a great place to start, it's most likely not enough.
Myth 5: I stay at home and don't earn an income anyway, so I don't need life insurance
Imagine you have one spouse staying home with a 1 year old and a 3 year old. You'll now need to pay for full time childcare for two kids, which will likely cost at least $1000 a month each. So that's about 2 years for the older, and 4 years for the younger, totaling around $72,000 until they're both in kindergarten. (Assuming rates don't go up and you never need to pay a nanny to help with drop off or pickup) Imagine you had a terminal illness and medical bills were incurred, and between uncovered expenses and your out of pocket maximum your responsibility was $10,000. Plan on memorial and funeral expenses, let's say $7,000. Let's say your partner had to take a few weeks of unpaid time off and you lost $3,000 of income. Before factoring in things like increased spending on convenience items like eating out, you're already nearing $100,000!
It is not my intent to freak you out, but it is my intent to make you seriously think about caring for your loved ones. There's no way to prevent your death, or protect your family from the grief that would follow, but you can at least help ensure that they're taken care of financially.
Want more help determining what type and amount of insurance is right for you? Schedule a consult with me!