5 Myths about Life Insurance Busted!
Most people view life insurance with mixed feelings. While many feel that it is a necessity, there are many others who are confused by the vast choices available by various companies.
We have debunked some myths about life insurance and hopefully it helps you make a more informed decision.
Myth #1: It’s difficult to decide how much life insurance I need
This might require some time and a little effort, but it is definitely executable.
One approach is to add up the expenses that you want covered for your loved ones, over a set period of time, in event you are not able to provide for them. E.g. you may want your life insurance to pay off the housing mortgage, children’s education and living expenses for your family for 5, 10 years or whatever timeline you feel suited.
Otherwise, you can use your income as guide. Decide how long you wish to insure your income for.
A professional financial adviser will be able to help you map out an appropriate level of coverage.
Understanding how much life insurance you need requires planning, and it is something that you can easily do by yourself or with some help.
Myth #2: I’m young and single so I don’t need life insurance
Even if there’s no one financially dependent on you, a small amount of death cover may still be needed to cover your debts e.g. credit card bills, car loans, education loan etc.
You should also consider critical illness and disability coverage to take care of your living expenses and bills, in the event that you aren’t able to generate income due to illness or disability.
Other reasons to buy while young include locking in the lower premiums, and ensuring you get full coverage before you develop any health problems later on in life. Insurance is a funny thing. You buy it when you don’t need it, when you need it, you cannot buy it.
Myth #3: I’m a homemaker so I don’t need life insurance
A homemaker has many responsibilities such as taking care of the whole household and children, sometimes involving ageing parents as well.
The uncompensated labour of a homemaker often extends far beyond household chores and child upbringing. In the unfortunate event that you are no longer able to physically support the family; due to illness, death or disability, the family will have to seek alternative arrangements, such as engaging a domestic helper or paying for day-care and tuition services.
While your contributions are not monetarily remunerated, if you are unable to continue contributing, your family will suffer financially because they will require additional funds for these extra services that you are no longer able to perform.
Insurance pay-outs in the event of such unfortunate circumstances, can be crucial.
Don’t underestimate the power of life insurance.
Myth #4: I bought life insurance years ago, so I’m safe
Your sum assured then may not be enough to cover yourself now or in the future, thanks to a little thing called inflation. Assuming a flat inflation rate of 3% per annum, $100,000 today will only be worth $55,000 in 20 years! This is one of the many reasons you should review your insurance portfolio regularly to ensure your coverage is still sufficient and relevant. Besides, there is a high possibility that your income has increased over the years.
Life’s many milestones can also affect your coverage needs, such as getting a new home, buying a car, having offsprings etc. While there is no right time to review your insurance portfolio, you should do it at least once a year to ensure that your portfolio still matches all your needs and objectives.
Myth #5: I have enough savings for unforeseen events
Congrats. Give yourself a tap on the back. Truth is, most people cannot claim so. More often than not, it is a delusional statement, a lie to oneself not buy life insurance. Somehow believing that unfortunate events will not strike.
A professional financial consultant will not advise you to put more that what you can afford into life insurance. With prudent planning, there is a good chance you can get get more than what you have paid for life insurance in the long run.