Life insurance can be an important safety net for your family, or anyone who depends on you financially. After your death, it pays a benefit to your beneficiaries—usually children, a spouse or other family members. It can be an important protection for your future, yet only 52% of American adults own some form of life insurance coverage (whether that is individual or through an employer).1
Purchasing life insurance can feel like an overwhelming task when there are misconceptions about costs and eligibility. These myths may prevent people from proactively getting a policy to protect their families, which in turn, affects their long-term goals. Here are five myths about life insurance cost and coverage so you can be better informed:
Purchasing life insurance can feel like an overwhelming task when there are misconceptions about costs and eligibility. Here are five myths about life insurance costs and coverage so you can know the facts.
1. Life insurance is expensive
One of the biggest myths about life insurance is that it’s too expensive. Over half of Americans overestimate the cost of term life insurance by three times its actual cost.2 In reality, premiums can be relatively low for certain types of coverage, especially for younger individuals. 44% of Millennials estimate it to be more than six times higher—at a costly $1,000.3 In fact, 39% of people wished they’d purchased life insurance when they were younger,4 as policies generally go up as you age. A good approach is to use online calculators or speak with a licensed insurance or financial professional to get accurate life insurance quotes.
2. If you have a health condition, you’re not eligible
Many people believe that if they have a pre-existing condition, they can’t get life insurance. Insurers generally use your health to calculate rates and coverage amounts, but it doesn't mean you’re ineligible if you have a health condition. If you’re concerned about your health being an issue, “simplified issue” or “guaranteed issue” life insurance is also available, often through employer-provided coverage. The applications used for this type of policy typically contain a shorter list of questions, which may be the same for each applicant, and decisions are made based on very limited criteria.
3. If you have no dependents, you don’t need to have a policy
While many people focus on protecting their children, spouses, and loved ones, life insurance isn’t just for breadwinners. For example, if you owe cosigned debts, such as private student loans or a mortgage that someone else could be held responsible for, a life insurance death benefit proceeds can help protect the co-signer from taking on your debt if you die. It can also offer a financial safety net to small-business owners, as the death benefit can help the business stay afloat after you’re gone or help a partner buy out your shares. The death benefit can also be given to those who don’t rely on you financially, such as a charity or other nonprofit organization.
4. You don’t need life insurance if you’re young and healthy
Many people aren’t concerned about life insurance when they’re young and healthy, or they think they can’t afford it. Life insurance death benefit can help cover funeral costs and other debts if you die, so your family doesn’t have to. While this may not seem pressing when you’re young, events like the pandemic highlight how unpredictable life can be.
Future insurability is another factor to consider. Purchasing life insurance while you’re healthy will generally give you lower rates than if you wait until after a condition develops. If you develop a health condition before you buy life insurance, you may or may not be denied coverage, but the cost of coverage may increase.
5. Life insurance through your employer is sufficient
Group life insurance through your employer is an affordable option for many people, but the death benefit is typically only one or two times your salary, which may not be enough to support your loved ones if you pass away. Buying individual life insurance means you’re covered regardless of where you work or if you chose to stop working as long as you make the premium payments.
Purchasing life insurance doesn’t have to be overwhelming—especially if you have all the facts. Talk to an insurance or financial professional and ask about the different types of policies. One type of life insurance isn’t necessarily better than another—it’s about what’s right for you.
Learn more in our Life Insurance section.
