Life insurance is a product that’s long been misunderstood. Often, this is because thinking about life insurance brings up topics that many of us would prefer not to discuss. Whether it’s uncomfortable money conversations or contemplating your own death, a lot of people prefer to remain in the dark when it comes to buying life cover.
However, burying your head in the sand is probably not a good idea when it comes to planning for your financial future. The unexpected does happen, and life insurance could play an important part in helping your family get back on their feet.
Here are four common life insurance myths that may be keeping you from getting a policy:
1. Life cover is way too expensive:
This is probably one of the biggest myths people believe about life insurance. However, it seems that a lot of people decide that all policies are too expensive without doing much (if any) research. In fact, consumers often overestimate the cost of life insurance by 200 percent.
In reality, life insurance may be within reach for people who previously wrote it off as too expensive. The cost may depend on factors such as the type of policy and the company offering it, but there are countless products on the market that cater to budget-conscious consumers. For example, New Zealanders can now get life insurance for just $1 a day from companies such as Dollar Insurance. That price may be surprising to a lot of people!
2. I’m too young to need life insurance:
If your only experience with life insurance was receiving a payout when a grandparent passed away, then this myth is understandable. People may believe that they should get life cover when they retire, so they can “leave a little something” behind for their family. However, this is a misunderstanding of what life insurance is really designed for.
A life cover policy can help replace lost income when someone is no longer able or there to provide for their family. It’s essentially insurance against worst-case scenarios, like an early death or terminal illness diagnosis. The benefit amount could go towards the mortgage, household bills or whatever else your family might need if you were to pass away suddenly. For this reason, it may make the most sense for younger adults to have life insurance, especially if they have large debts or others who rely on them for financial support.
3. I’m not healthy enough to get a policy:
Insurers often use a person’s medical history, general health or body mass index to determine if they can offer them a policy. In some cases, people may have their applications rejected due to poor health. However, just because you’ve been turned down for life insurance before doesn’t mean you can’t be covered.
Certain health issues may mean that you’re disqualified from some underwritten policies, but you may be able to get what’s known as a guaranteed acceptance policy. As the name implies, just about anyone can take out this type of policy, regardless of their health. These policies often include health-related exclusions for when they’ll pay the benefit, so it’s important to carefully read the policy wording to make sure it meets your needs.
4. Life insurance is too hard to understand:
Even if you’re ready to get covered, finding the right policy may feel overwhelming. Legal jargon and language that’s difficult to understand can make it hard to understand the policy wording and to compare products offered by different companies.
Many insurance companies still use formal language and insurance terms, but others are listening to customer feedback. More companies are using “plain English” to explain their life cover policies to help customers better understand their products. Many also use social media and blogging to help educate people on life insurance basics and clear up common misconceptions.
Life insurance could play an important part in your family’s financial future. That’s just one reason why people may need to unlearn the many myths that surround these policies. Knowing what products are available to you, why you might need a policy and when to buy, could make all the difference to the ones you love the most.