Life Insurance: 7 Myths About Life Insurance PDF Print E-mail
Written by Severica Vintila   
Thursday, 04 February 2010 20:34
There are a lot of myths and misconceptions when it comes to life insurance.You need to know the truth when it comes to what you are purchasing, don't just assume based on rumors you've heard. Mistakes made when buying life insurance have long-lasting consequences. If your family isn't provided for as they need to be, you won't be here to fix it.
by SevericaVintila


There are a lot of myths and misconceptions when it comes to life insurance.You need to know the truth when it comes to what you are purchasing, don't just assume based on rumors you've heard. Mistakes made when buying life insurance have long-lasting consequences. If your family isn't provided for as they need to be, you won't be here to fix it.

You need to choose the life insurance that is right for you. You can do so by avoiding these seven common myths:Myth #1: You should buy seven times your annual earnings.The rule of thumb that says you should have so many times your annual income isn't necessarily true. The average American has a policy three times his or her annual income. Your dependents should be able to withdraw 5% each year from your insurance policy money without having to touch the principal. If you are making $60,000 annually and you purchase three times your annual income, you have an $180,000 policy. This means your heirs will only be able to withdraw $9,000 each year.

It is important to consider the cost when you are deciding which type of policies is best for you, and how much policy you should by.

Advances in medical science thankfully mean that more and more people will survive many of the major serious illnesses. Unfortunately this recovery can take many months, or even years and necessitate long period of time off work. It may not be possible to carry on with the same work, meaning a change of career. In some cases it may be necessary to change your home and car.

Myth #3: All policies are the same, you are just charged more.You have to read your policy. It is a contract between you and an insurance company. It tells you what is payable and what isn't. All policies have different features. Make sure that you have received what you were told you were getting. Make sure that all names are correctly spelled and all numbers are right. Your written policy is what matters, not your phone conversations or your agent's promises.

Myth #4: You should always name your estate beneficiary.If you do, the proceeds will go through probate. This means that your policy proceeds could be tied up for several months to over a year. Your heirs will not have access to the money during this time.The proceeds will also increase the value of your estate, which means your family might have to pay estate taxes. If you have an estate over $1.5, you will pay taxes depending on your state. Estate taxes are often as high as 48%, so do everything you can to avoid them.

Myth #5: If you are in poor health, you are uninsurable.This simply isn't true. There are a lot of companies out there that specialize in coverage to those who have or have recovered from a serious illness. The coverage is often expensive, but you can get it.Being turned down once doesn't mean it will happen again. Shop around, one company might charge you an added surcharge, while another will charge you a standard to preferred rate. It really depends on the company, not just your health status.

Having got CI cover sorted, this would be an excellent time for our young man to arrange some simple life insurance. Simple life insurance is reasonably priced and offers important cover. A term insurance policy will run for a set number of years. If the policyholder should die during this period, a lump sum would be paid to his dependants. Even if there are no dependants when the young man first takes this cover out, there may be loans and other debts and maybe some fairly "light" cover, for a limited term would be a good step to take. It can be topped up as circumstances change. Certainly his insurance will never be cheaper - when it comes to insurance, it's a case of the younger the better.

Some of these other types of programs can also be less expensive, so it might be something that you are considering, in order to be sure that you have the right coverage that would cover all the necessary cost when the time comes.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

Want to find out more about Online Life Insurance Quotes, then visit Severica Vintila's site on how to choose the best Life Insurance Quote for your needs.