There is no denying that there is a lot of talk about the insurance industry. However, the trouble with this is that there is a lot of misinformation out there. This can cause people to make poor decisions because they have been basing their choices on incorrect details.
According to Aviva, more people have been looking to take out life insurance, and claims increased by 9% in 2020 due to the pandemic.
The toll that the [pandemic] continues to have on peoples’ mental health has been widely acknowledged for some time now.Richard Jones, Aviva Life & Pensions Ireland
Therefore, in this post, we will dispel some of the most common myths about life insurance.
1. Life insurance is only for breadwinners
A lot of people assume that you only need to take out a life insurance policy on the breadwinner in the family. This could not be further from the truth. Let’s say you are a stay-at-home mom. You may think you don’t need life insurance. After all, you don’t work.
However, just think about what you contribute to the family. You look after the children and the house. If you were no longer here, who would do that? The cost of childcare is huge these days, which is why life insurance is a must.
2. The cost of life insurance premiums are deductible
Unfortunately, this is not always the case. It depends on the status of your employment. If you are self-employed, you may be able to put down your premiums as a deductible expense.
3. Work life insurance is enough
A lot of employers off insurance policies as part of their benefits package for their workforce. However, do not simply assume that this going to be sufficient. All policies are different. You need to find the best life insurance policy for your circumstances.
What if the policy at work does not cover funeral expenses and medical bills? If this is the case, you may want to consider income protection insurance. A cheaper option could be mortgage protection insurance if you only want to cover your largest outgoing.
4. Coverage needs to be twice my yearly salary
Many people believe that their life insurance coverage should amount to twice their annual salary. However, you can’t put all policies in this box. It really does differ from person to person. There are so many different factors to consider, for example, how much you provide for your family, mortgage payments, funeral costs, whether there are any debts to pay off, and so on.
5. I don’t have any dependents, so I don’t need life insurance
Lastly, everyone needs life insurance, irrespective of the dependents they have. This policy will cover the likes of funeral bills and the cost of funeral directors, medical costs, and personal debts. If you are uninsured, this could mean that whoever is left needs to cover these costs, which can be a big burden on someone.
As you can see, there are several different myths out there about life insurance. However, hopefully, you now have a better understanding of what is true and what is not. You may think that this is something you do not really need to consider now. But the sooner you start thinking about these things, the better!
James Banerjee is a Senior Account Manager who graduated from the University of Kent in 2014. He works in SEO on clients such as HSBC UK and Nestle and he has a keen interest in personal finances and money-saving advice.