Watch For These 10 Life Insurance Myths
Life insurance can be as complicated as you want to make it. As simple as term life policies are there are many elements to be considered carefully in order to arrive at the correct type and benefit in Akron Ohio . It is the technical aspects of life insurance that most people can deal with rather than trying to get a handle on how much coverage they need and why.
What you will read will briefly take a look the some of the most common myths pertaining to life insurance and the truths that they sometimes distort.
Myth No.1: I'm single and don't have any dependents, therefore I don't need any coverage. Even a single person needs at least enough life insurance to cover the costs of personal debts, medical and funeral bills. If you are uninsured, you may leave a legacy of unpaid expenses for your family or executor to deal with. Plus, this can be a good way for low-income singles to leave a legacy to a favorite charity or other cause.
Second Myth: I only need an amount of life insurance coverage equal to twice the amount of my annual salary. That depends. You need an amount of life insurance equal to the amount that is needed based on your families needs. In addition to obvious bills and expenses, you may need to pay off larger debts such as the mortgage and provide an income for a number of years, in Akron Ohio. A cash flow analysis is usually helpful in order to determine the actual amount of insurance that must be bought - the days of simply computing life coverage based only on one's income-earning ability is long gone.
Myth No.3: My term life insurance coverage at work is sufficient. Maybe it is or maybe it is not. For a single person of modest means, employer-paid or provided term coverage may well be enough. But if you have a spouse or other dependents, or know that you will need coverage upon your death to pay estate taxes or create an estate for charity, then additional coverage may be necessary if the term policy does not meet the needs of the policyholder.
Myth No.4: At least the cost of my premiums will be deductible. Not in most cases. The cost of personal life insurance is never deductible unless the policyholder is self-employed in Akron Oh and the coverage is used to insure the business. Then the premiums are deductible on the Schedule C of the Form 1040.
Myth No.5: I absolutely MUST have life insurance at any cost. In many cases, this is probably true. However, persons with no debt or dependents and sizable assets may be better off self-insuring. If you have no debt and medical and funeral costs are covered, and then life insurance coverage may be optional.
Sixth Myth: I am always better off buying term and investing the difference. Not always. The cost of term life coverage can become very expensive in the later years, so those who know for certain that they must have coverage until death, should consider permanent coverage. The overall premium outlay for a more expensive permanent policy may be less than the rising premiums that could last for years longer with a less expensive term policy.
There is also the chance of being uninsurable, which could be disastrous for those who may have estate tax issues will use life insurance to pay them. But this risk can be eliminated with permanent coverage, which can become paid up after a certain amount of premiums have been paid and then remains in force the rest of your life.
Seventh Myth: Straight universal life policies, in Akron Ohio are always inferior to variable universal life policies. Many universal policies pay competitive interest rates, and variable universal life (VUL) policies contain several layers of fees relating to both the insurance and securities elements present in the policy. Therefore, if the variable sub accounts within the policy under perform, and then the variable policyholder may well see a lower cash value compared to someone with straight universal life policies
Sub par market performance can also generate substantial cash calls inside variable policies that require additional premiums to be paid in order to keep the life insurance portion of the policy in force.
Eighth Myth: Only the one making the money needs life insurance coverage. This is pure nonsense. The cost to replace the responsibilities that were provided by a deceased homemaker can be higher than you think; the costs for cleaning and daycare are higher than you think.
Ninth Myth: You should always add the return of premium (ROP) benefit in Akron Ohio. There are several different levels of ROP riders available for policies that offer this feature. Some financial advisors will tell you that this rider is not cost-effective and should be avoided. Whether you include this rider will depend on your risk tolerance and other possible investment objectives.
A cash flow analysis will reveal whether you could come out ahead by investing the additional premium amount, of the rider elsewhere, instead of putting it into the policy. Riders are available to provide additional benefits that help you customize your policy.
Tenth Myth: I will be better off investing my money than buying life insurance of any kind. Complete nonsense. Until you reach the breakeven point of asset accumulation, you need life coverage of some sort, barring the exception discussed in fifth myth. Once you amass $1 million of liquid assets, you can consider whether to discontinue, or at least reduce, your million-dollar policy. But you take a big chance when you depend solely on your investments in the early years of your life, especially if you have dependents. If you die without coverage for them, there may be no other means to provide for them after the use of your saved assets.
In conclusion, these are just some of the more common mistruths concerning life insurance. The key idea to understand is that you eliminate life insurance out of your budget unless you have sufficient assets to cover expenses, several years after you've passed away.
What you will read will briefly take a look the some of the most common myths pertaining to life insurance and the truths that they sometimes distort.
Myth No.1: I'm single and don't have any dependents, therefore I don't need any coverage. Even a single person needs at least enough life insurance to cover the costs of personal debts, medical and funeral bills. If you are uninsured, you may leave a legacy of unpaid expenses for your family or executor to deal with. Plus, this can be a good way for low-income singles to leave a legacy to a favorite charity or other cause.
Second Myth: I only need an amount of life insurance coverage equal to twice the amount of my annual salary. That depends. You need an amount of life insurance equal to the amount that is needed based on your families needs. In addition to obvious bills and expenses, you may need to pay off larger debts such as the mortgage and provide an income for a number of years, in Akron Ohio. A cash flow analysis is usually helpful in order to determine the actual amount of insurance that must be bought - the days of simply computing life coverage based only on one's income-earning ability is long gone.
Myth No.3: My term life insurance coverage at work is sufficient. Maybe it is or maybe it is not. For a single person of modest means, employer-paid or provided term coverage may well be enough. But if you have a spouse or other dependents, or know that you will need coverage upon your death to pay estate taxes or create an estate for charity, then additional coverage may be necessary if the term policy does not meet the needs of the policyholder.
Myth No.4: At least the cost of my premiums will be deductible. Not in most cases. The cost of personal life insurance is never deductible unless the policyholder is self-employed in Akron Oh and the coverage is used to insure the business. Then the premiums are deductible on the Schedule C of the Form 1040.
Myth No.5: I absolutely MUST have life insurance at any cost. In many cases, this is probably true. However, persons with no debt or dependents and sizable assets may be better off self-insuring. If you have no debt and medical and funeral costs are covered, and then life insurance coverage may be optional.
Sixth Myth: I am always better off buying term and investing the difference. Not always. The cost of term life coverage can become very expensive in the later years, so those who know for certain that they must have coverage until death, should consider permanent coverage. The overall premium outlay for a more expensive permanent policy may be less than the rising premiums that could last for years longer with a less expensive term policy.
There is also the chance of being uninsurable, which could be disastrous for those who may have estate tax issues will use life insurance to pay them. But this risk can be eliminated with permanent coverage, which can become paid up after a certain amount of premiums have been paid and then remains in force the rest of your life.
Seventh Myth: Straight universal life policies, in Akron Ohio are always inferior to variable universal life policies. Many universal policies pay competitive interest rates, and variable universal life (VUL) policies contain several layers of fees relating to both the insurance and securities elements present in the policy. Therefore, if the variable sub accounts within the policy under perform, and then the variable policyholder may well see a lower cash value compared to someone with straight universal life policies
Sub par market performance can also generate substantial cash calls inside variable policies that require additional premiums to be paid in order to keep the life insurance portion of the policy in force.
Eighth Myth: Only the one making the money needs life insurance coverage. This is pure nonsense. The cost to replace the responsibilities that were provided by a deceased homemaker can be higher than you think; the costs for cleaning and daycare are higher than you think.
Ninth Myth: You should always add the return of premium (ROP) benefit in Akron Ohio. There are several different levels of ROP riders available for policies that offer this feature. Some financial advisors will tell you that this rider is not cost-effective and should be avoided. Whether you include this rider will depend on your risk tolerance and other possible investment objectives.
A cash flow analysis will reveal whether you could come out ahead by investing the additional premium amount, of the rider elsewhere, instead of putting it into the policy. Riders are available to provide additional benefits that help you customize your policy.
Tenth Myth: I will be better off investing my money than buying life insurance of any kind. Complete nonsense. Until you reach the breakeven point of asset accumulation, you need life coverage of some sort, barring the exception discussed in fifth myth. Once you amass $1 million of liquid assets, you can consider whether to discontinue, or at least reduce, your million-dollar policy. But you take a big chance when you depend solely on your investments in the early years of your life, especially if you have dependents. If you die without coverage for them, there may be no other means to provide for them after the use of your saved assets.
In conclusion, these are just some of the more common mistruths concerning life insurance. The key idea to understand is that you eliminate life insurance out of your budget unless you have sufficient assets to cover expenses, several years after you've passed away.
About the Author:
For more see our videos, or see our faq articles on How To Meet Your Loved Ones Needs, or obtain a quote from an agent.