Life insurance being a complex product which has many elements that must be evaluated carefully in order to make a rightful decision on the proper type and amount of coverage. The technical aspects of life insurance may be less difficult for most people to deal with when compared to get a idea on how much coverage they need and why is it so. Let us examine some of the common misconceptions on life insurance and their realities.
I Don’t Need Life Insurance as I am single
Even if you are single, you would need at least some life insurance cover to take care of the costs of personal debts and medical bills. If you are uninsured, you may leave those unpaid expenses for your family who may not be a dependent of you, to deal with. Also this can be a memorable way for singles to leave a legacy to a charity cause.
Life Cover needs to be just double of my Annual Salary
The cover amount of life insurance you need depends on your specific situation. You may need to consider many factors pay off debts for your mortgage and provide for your family a consistent income for several years.If you do a proper cash flow analysis you will be able to understand the true amount of insurance that must be purchased.
I have Sufficient Life Insurance Cover at Work
It all depends. If you are single and do not have much liabilities incurred, employer-paid or provided term coverage may actually be enough. But if you have a family and other dependents, and need to settle debts from mortgage or businesses, you might need a bigger sum on top of the employer life insurance cover.
Invest Money than buying Life Insurance
Till the time you accumulate enough liquid assets, it is advisable to have a Life Insurance Cover to take care of the financial requirements of your family and dependents, in your absence. Probably you can consider reducing the Life Insurance cover and invest that difference in premium, post accumulating a comfortable and sizeable amount as assets which can be made liquid if required.
These are just some of the common prevalent misunderstandings concerning life insurance. The primary responsibility of all of us is to understand the key concept of not leaving life insurance out of your budget, unless you have enough assets to cover expenses of your family in your absence.