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On the surface, the concept of life insurance may appear puzzling especially if you’re just getting to know about it. But with correct sources of information, it’s not that hard to understand.
In today’s post, we demystify the seven most common myths about life insurance. We separate the facts from the rumors and misinformation as a way of empowering our readers.
So without further ado, let’s dive straight into the common ones:
Employer-sponsored life insurance is enough
If you’re employed, perhaps one of the privileges you enjoy is group life insurance or relevant life policy. Albeit designed to cover you against work-related risks, their benefits might be inadequate for your private needs. This means you cannot rely on them fully to cover you or anyone who depends on you including your family.
What’s more, you can decide to resign or in worst cases get laid off. In both cases, you lose the benefits that your employer-sponsored life insurance policy offers.
Therefore, we encourage you to consider taking out additional insurance coverage whose control you have. A good starting point is Whole of Life or Term Life policies.
Young people don’t need life insurance
No one is ever too young to face a life risk; this explains why insurance contracts are designed for people as young as 18. Besides, your passing away can have significant impacts on those that you leave behind even when you’re youthful.
Luckily, life insurance offers policies for people of all ages. Also interestingly, some providers may charge young people lower rates on premiums.
Guarantee of payout
Anyone who buys life insurance envisions to provide financial cover to their beloveds. However, the issuance of payout is not always guaranteed as most people commonly believe. Wondering why?
First, the people you list as your beneficiaries must file a legal claim to receive the death benefits. This formality aims to ensure that the specific risk covered by your insurance policy has already occurred.
Most business-related life insurance policies also involve trustees. Their role is to hold and disburse the death benefits to the people you listed as the policy’s beneficiaries.
Premiums are fixed
Although most insurers charge fixed premium fees throughout the term of the insurance contract, there are exceptions to this. A common one is a concept known as reconsideration.
Where reconsideration is applicable, you can bargain for cheaper rates thus lowering the amount you pay as a premium. Your insurer then retakes the underwriting process, which allows the reassessment of your situation. Sometimes, you may have to redo the examination tests that prove that your level of risk is lower.
Single people don’t need life insurance
The assumption here is that if you’re single, you do not have people depending on your income for livelihood. But that is not always the case!
If you suddenly passed away, anyone depending on you would struggle to cope with the aftermath. Moreover, your funeral would attract costs that require someone to bear on your behalf. In short, coverage for such life risks is essential regardless of your current status quo.
Life insurance provides a mechanism to cater to your financial burdens in your absence. It provides financial assistance that takes care of expenses that arise during deaths and terminal illnesses. It can assist in the repayment of your debts, burial costs, and arrears of mortgage.
Life insurance is expensive
Most people avoid a life insurance contract citing its high cost. Sure, taking out such policies can be expensive but there’s a benefit when the unpredictable happens. Besides, you can always discuss with your insurer a plan that works for your budget.
Generally speaking, the cost of premiums and life insurance overall is dependent on your circumstances. Additionally, you pay for the benefits that you want without coercion. With this, you can then find a package that is financially sound and offers the amount of cover you desire.
People with existing medical conditions are not eligible for coverage
Tens of concerned readers contact us every week looking to find out whether they can take out life policies if having medical issues. The truth is most insurance companies offer plans for this category of clients.
For example, the over 50s policy and non-medically underwritten life insurance do not require you to answer medical questions. The downside however is that these policies come with higher premiums as the risk is also comparatively higher.
Know any other misconceptions that we’ve not listed? Please share it with us and help us help others.