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Common life insurance myths

I don't work so I don't need insurance

Even if you're not earning a salary, you may need life insurance. A stay-at-home parent with dependent children may opt out of life insurance because there's no paycheck to replace. However, it could cost $10,000 to $30,000 per year to pay for childcare and housekeeping services in the parent's absence. Figure out how much it would cost for your family and use that number for your "salary" when calculating life insurance needs.

It takes time to get life insurance

Buying life insurance is now streamlined with instant online quotes from dozens of highly rated companies. You can do the research and collect quotes on your own, then consult with a trusted agent to purchase the insurance. Or you can download application forms and work directly with the company. The agent or company will arrange to collect the medical information they will need.

If you're a do-it-yourselfer, research the company's ratings. Most quote sites have links to the ratings and explanations about how to interpret them.

Finally, if you are changing life insurance, don't cancel existing policy until your new insurance is in place to avoid gaps in your coverage.

I don't need life insurance

Even person needs at least enough life insurance to cover personal debts, medical and funeral bills. If you are uninsured, you may leave unpaid expenses for friends, family or executor to deal with. Do you want your legacy to be unpaid expenses for your family or executor to sort out?

I only need twice my annual salary

In addition to medical and funeral bills, you may need to pay off debts such as your mortgage and provide for your family for several years. Cash flow analysis is helpful to determine the true amount of insurance that should be purchased. Computing life coverage based on income-earning ability are over

My employer's group term life insurance is enough

If you have a spouse and/or dependents, or need more than the maximum coverage of $50,000 of most employer plans, then additional coverage usually is necessary.

My premiums are deductible

The cost of personal life insurance is never deductible unless the policyholder is self-employed and the coverage is used to insure a business. Then the premiums are deductible on the Schedule C of the Form 1040.
I must have life insurance
If you have no debt or dependents and some assets, you may be better off self-insuring. If you medical and funeral costs covered, life insurance coverage could be optional.

Buy term life and invest the difference

The cost of term life coverage gets really high in later years so if you know for certain you need coverage past age 70-80, you should consider permanent coverage. The total premiums for a permanent policy may be less than the ongoing premiums of a initially less expensive term policy. An insured could become uninsurable after health or life style issues. Those can be avoided with permanent coverage, which becomes paid up after a certain amount of premium has been paid and remains in force until death.
Variable life policies are superior because of their long-term growth
Variable universal life (VUL) policies contain several layers of fees relating to both the insurance and securities elements present in the policy. So if the variable sub accounts within the policy do not perform well, then the variable policyholder may well see a lower cash value than someone with a straight universal life policy. Poor market performance can even generate substantial cash calls inside variable policies that require additional premiums to be paid in order to keep the policy in force.
Only the main earner needs life insurance

The cost of replacing child care, chef duties, maid service and counseling services formerly provided by a homemaker can be very high. You must either pay the expenses out of pocket, remarriage or life Insurance.

Always purchase the ROP (return of premium) rider

Adding this protection will raise the overall cost of the policy accordingly. In this article, we'll take a look at a new form of policy rider that may be very attractive to investment-minded individuals who are seeking the sensibility of term coverage.

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