Have you ever considered how financially stable your family would be in the unfortunate event you could no longer earn an income due to death, physical disability, or terminal illness? Current statistics indicate that over half of all affluent households (those with an annual household income of at least $150,000) rely on two incomes. This means that for the majority of financially comfortable Americans, losing a primary source of income could drastically impact both their financial well-being and current lifestyle.
While approaching the topics of death and loss can be unpleasant, having a policy in place for the benefit of both yourself and your family can help to prevent financial devastation in already emotionally taxing circumstances. Don’t let one of these common myths leave your family exposed to unnecessary financial risk.
Myth #1 It’s Too Expensive:
According to the 2019 Insurance Barometer Study, Life Happens and LIMRA:
- Over half of Americans think the cost of a term life insurance policy is 3x more expensive than its actual cost.
- 42% of Millennials estimate the yearly cost for a $250,000 20-year term life insurance policy for a healthy 30-year-old at $1,000 or more per year. The actual cost is $160/ year.
- Affordability and value are two obstacles that stop Americans from buying life insurance.
While many Americans believe that life insurance will just add an unwieldy bill to their list of monthly expenses, it is actually more affordable than they may realize. In many cases, a young adult could likely pay for their monthly premium with less than they’d spend eating out for one night. Of course, policy prices do increase with age and are affected by your personal health, but life insurance should not be ruled out due to misconceptions on price.
Myth #2: My Employer Provided Plan is Enough:
While some employers do offer life insurance policies as part of their benefits package, the death benefit may only cover one to two times the amount of your actual salary. Experts and financial professionals alike generally suggest purchasing a policy that will cover both funeral expenses as well as five to ten times your actual salary (depending on your other financial resources).
What many individuals fail to consider, as well, is that this coverage will lapse if you retire, leave, or lose your current job. A personal policy, on the other hand, will remain intact as long as you continue to make your payments.
Myth #3: I Don’t Work, I Don’t Need It:
Not all family contributions come in the form of a paycheck. Many homemakers, especially women with children, don’t often think about how much the things they do on a daily basis would cost to replace—daycare or childcare, housekeeping, cooking, transportation, etc. If you were unable to help support your spouse with these functions, he would need to spend money for childcare and help around the house to enable himself to continue going to work to earn his income.
Myth #4: Life Insurance Is Only Worth It If You Pass Away:
While it is true that the death benefit is the most well-known reason for buying life insurance, there are also policies that provide income replacement in the event you become terminally ill or physically unable to earn your current paycheck. This makes sure you and your family aren’t faced with sacrificing your current lifestyle should you have difficulty earning your usual wages.
Myth #5: I’m Single, I Don’t Need It:
NgSure, life insurance is typically advertised as benefitting those with families, but life insurance can be helpful for single individuals, as well. Small business owners can purchase life insurance policies to cover any loans they have taken out against the business. Individuals with a significant amount of student loan debt may also want to consider purchasing a life insurance policy so their remaining debts do not financially debilitate the family members who will inherit the balance due.
At Northstar Financial Planning, we take risk management seriously, because we believe life insurance can be an invaluable financial asset should tragedy strike. Overall, our goal is to help you understand the importance of life insurance in any sound financial plan so you can better protect yourself and your family. Do you have a plan in place? Have you reviewed your coverage lately to ensure your needs are adequately covered? Contact us today to discuss picking the right policy or to review your current coverage.
Life insurance can’t prevent the unexpected from occurring, but it can make the transition much smoother.