Life insurance: 7 Myths and facts

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By: Anna Sweeting
on 24th Mar,2016

S. have no life insurance. This is because the concept of life insurance actually leads them to think about death.
Life insurance: 7 Myths and facts

According to a study by the Life and Health Insurance Foundation for Education (LIFE), around 40% of adults in the U.S. have no life insurance. People tend to freak out while they talk/think of life insurance. This is because the concept of life insurance actually leads them to think about death. As a result there are quite a large number of mis-conceptions regarding life insurance.

September is the life insurance awareness month. Let's take a look at few myths and facts concerning life insurance:

1. Myth: Life insurance is too costly.
Fact: In a study by Life and Health Insurance Foundation for Education (LIFE), it has been found that people are of the opinion that life insurance coverage is too expensive to afford. However, the truth remains that people can find affordable term insurance. In the last few years, the cost of the simple level term insurance has come down by more than 60%. Also, there are insurance companies offering a life insurance of $500,000 dollars to a healthy 40-year-old nonsmoker with a premium guaranteed not to change for 20 years.

2. Myth: Lifestyle doesn't affect insurance premiums.
Fact: Such an opinion is completely wrong. Lifestyle surely has a direct impact on life insurance premiums. Most of us are ignorant of the fact but it is true that the healthiest individuals often get the lowest premiums. Some other factors that can also affect the life insurance premiums include the likes of smoking habit of a person, occupation and hobbies of a person, etc.

3. Myth: Life insurance is essential for those with dependents.
Fact: Life insurance is essential for all, irrespective of the fact whether or not you've dependents. Your spouse or your kids may not be your dependents. Your parents can also be dependent on you. Moreover, a life insurance can cover expenses such as funeral arrangements and at times may help you in paying off your impending debts.

4. Myth: Your family will benefit from insurance policy after you die.
Fact: Most of us don't know the fact that a permanent life insurance policy will offer a number of living benefits.  This includes the ability to access the cash value of the policy through withdrawals or tax-free loans for various needs such as funding a child's education.

5. Myth: The cost of premium will be deductible.
Fact: This is a mis-conception. The cost of personal life insurance is never deductible if you have an employer. However, in case if you're a self employed policyholder and the coverage is used to insure your business, then on Schedule C of the Form 1040, you will be able to deduct the premiums.

6. Myth: Life insurance is taken care of through my job. No need for a separate policy.
Fact: It is a great benefit that you have a life insurance policy through work. However, it should be kept in mind that this is a temporary coverage. Once you leave your job, this coverage will come to an end. So, it's better to go for a separate life insurance policy. Moreover, the coverage offered by your employer will be an amount equal to your annual salary or a modest flat amount. That may prove insufficient for you.

7. Myth: The family breadwinner should only have life insurance coverage.
Fact: People hardly realize the fact that even if you're a stay-at-home mom or dad, you contribute to your family with the valuable services that you provide like cooking, cleaning and driving the kids around town, etc. So, if anything happens to non-working spouse, more than one life insurance policy will actually protect the family. There is a financial cost, even if the deceased did not have any income. So, a life insurance policy can be of great help whether or not you're the breadwinner for your family.

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