While most people understand the importance of life insurance and know that they might have to consider the option at some point in their lives if they haven’t already, it’s surprising to see how many people still know little about it. They then end up making costly mistakes or choices based on assumptions. In other cases, they might not be aware of gaps in their coverage that could end up severely affecting their dependents. Let’s take a look at some of the most common myths and misconceptions about life insurance.
Insurance Companies will Do Everything they Can to Avoid Paying Out
It is commonly believed that insurance companies are here to scam you and will do all that they can to avoid paying out. But these companies routinely publish their pay-out to claim ratio, and almost all claims are paid by life insurance companies. Trying to cheat someone out of life insurance is much more complex than with something like auto insurance where there could be so many conflicting factors.
There is also a myth that insurance companies will make it a pain for you to claim, but that’s wrong again. If you want to make sure that the claim process goes as smoothly as possible, you’re the one who is going to have to take the proper steps.
This firstly means that you have to be completely truthful when answering questions when applying. You also want to be as accurate as possible. Also, you want to make sure that each of your dependents knows that you have a life insurance policy. You want to let them know the term of the insurance policy in question, the insurer, and the policy number.
Couples Should Always Get a Joint Policy
Some people will automatically assume that it’s a better idea to get a joint policy if you have the chance, but that’s not always the case. While it’s true that these policies will usually cost you much less, the coverage won’t be as comprehensive.
The main issue with these policies is that they only pay once. The policy will pay out the minute one of the two partners dies, and once that happens, the other partner is on their own. And at this point, their premiums are likely to go up due to age. Not only that, but there’s also the possibility of you separating at some point, which comes with additional issues.
Pay-outs Are Tax-Free
They can be, but they aren’t necessarily. This is what confuses so many people about taxes and life insurance policy pay-outs. If you want your policy pay-outs to be tax-exempt, they have to be “written in trust”. If you don’t do that, pay-outs will be hit with an inheritance tax. So, make sure that you know this and that the policy is properly drafted.
I Can’t Get Affordable Life Insurance if I Have a Chronic Condition
Another thing that many people are scared about when considering life insurance is whether they’ll be able to get a reasonable deal if they have a chronic condition, like diabetes for instance. While it is true that this will be taken into consideration during calculations, it is still possible to get reasonable premiums when you know where to look.
We strongly suggest you check out I’m Insured if you want to learn more about getting life insurance with diabetes. Not only will you be able to know how to get diabetes life insurance for a reasonable price, but you will also be able to get a free quote from a certified broker. This service will connect you with all the best providers for your condition and could help you save thousands on your policy.
You Don’t Need Insurance if You Don’t Work
Another thing that people assume is that they don’t need to get insurance if they’re not contributing financially to the household, but that couldn’t be further from the truth. You still have a spouse to worry about, and if you have a family, your absence could still lead to financial loss to them.
For instance, if you’re no longer there to take care of the children during the day or take them to school and back, this means that the other partner might now have to pay for someone to do it or take on some additional costs. That can make a significant difference in their budget, so this is something that you should be aware of.
These are just some of the most common myths that are being propagated about life insurance and insurance in general. If you’re currently in the process of shopping for a life policy, we suggest you do as much research as you can and make an informed decision before you sign anything.
*Content courtesy of The Yorker*