Common myths about life insurance
Do you have enough life insurance? Insurers, as you'd expect, say many of us don't. The life insurance industry contends that about 30 percent of consumers go without -- and those with coverage probably haven't bought enough to protect their families.
So, what's the deal-breaker? Insurance companies say most people don't like to look at policies for sentimental reasons -- they cause you to reflect on death and how it could affect loved ones. Beyond these touchy issues, most people don't fully understand life insurance and how much they might need, note insurers.
"People don't like to think about their own death or a family member dying, and many misconceptions persist about life insurance," says Steven Johnson, assistant vice president of product development at Colonial Life, in a statement. "Learning to spot some of the myths can help."
Here are seven common life insurance myths, according to Colonial Life:
1. I get coverage at work, so why should I worry about it?
Johnson explains that if, indeed, your employer is paying for the coverage, it's most likely through a group policy. He says that means that the protection through this type of policy usually lasts only as long as you stay on the job.
To prevent a break in coverage if you lose that job, Johnson recommends looking into buying an individual life insurance policy separate from one provided by an employer. Colonial Life notes that, according to LIMRA research on the industry, "only 44 percent of adult Americans have individual life insurance."
Johnson adds that "individual plans are portable, allowing policyholders to keep their coverage if they change jobs or retire."
2. I understand life insurance. And guess what? I have enough already.
Maybe, says Colonial Life, but maybe not. Johnson advises prospective buyers to consider policies worth seven to 10 times a person's annual income.
According to the insurer, "most households only own enough life insurance, on average, to replace their income for 3.5 years."
3. The policies are too costly.
According to LIMRA, most people avoid life insurance because they believe it's unaffordable. LIMRA notes that a 2012 survey of consumers indicated that most thought a policy would cost more than twice what it actually does.
"Many types of life insurance are available … term life plans, which are generally less expensive than other types of permanent life insurance, can be purchased for just a few dollars a pay period," Johnson says.
4. I don't need life insurance because I'm single.
Regardless of marital status, a policy can help with expenses if you were to die, says Colonial Life.
"Even if no one else depends on their income, single individuals are still likely to leave behind bills, credit card balances and final expenses such as funeral costs," the company suggests. "These expenses could become an unnecessary burden on parents or siblings at a difficult time."
5. I don't need a policy for my spouse because he or she doesn't work outside the home.
Don't underestimate what they contribute, says the insurer. "Non-working spouses certainly have a need for life insurance when one considers the many contributions they make to the household, such as child care, laundry, cooking, shopping, cleaning, home maintenance, transportation and errands," notes Colonial Life.
A policy for them, the company believes, could help "protect a family's way of life."
6. My kids are so young and healthy. They obviously don't need life insurance yet.
The insurer says it's painful to consider a child's mortality, but they can die prematurely and leave behind final expenses, such as medical bills and funeral costs.
"And buying and keeping coverage for children while they're young protects their insurability if they develop a health condition later in life that could make it more expensive or impossible to get coverage," says Colonial Life.
7. I'm in good shape right now. There's plenty of time for me to consider coverage.
The company says you might want to look into a policy when you're younger because coverage gets more costly the older you get. Further, the company points out that you might develop a health condition as you age that could make it difficult, if not impossible, to buy a policy.
Des Toups is a writer, editor and expert on insurance, cars and personal finance. He has written extensively about all three for national publications such as MSN and major newspapers such as the Seattle Times. He has been quoted about insurance issues in The New York Times, USA Today and Kiplinger's. Follow him on Twitter @destoups.