Although the concept of life insurance is relatively simple, that is not always true of life insurance products. Even more, the life insurance industry has changed significantly in the past fifteen years and now offer products that solve more consumer needs than ever before. Many investors, and even some insurance professionals, are still not aware of how insurance can solve many of the life-time of financial concerns investors and consumers have voiced over the past ten years. This article explores the five most harmful life insurance myths that still prevail. Even educated professional often find they have to debunk persistent insurance myths that have been the root of many poor and even harmful consumer decisions. Listed below is an examination of some of these myths and misconceptions we face every day.
Myth #1: If you are single and have no dependents, you don’t need life insurance.
There was a time when it was often argued that as long as funeral and burial expenses were covered, there was no need for life insurance for most single people. However, there are several reasons why this myth is not true and can be harmful to the single individual who decides not to consider life insurance until married. A single person has several concerns that life insurance can resolve. First among those is what if you get a serious illness like cancer, heart attack, stroke or any one of the many chronic diseases that can debilitate you and place you in a position of needing in-home care or a prolonged hospital stay? A good health insurance policy will cover most of your medical bills, but who will pay your other bills when you can’t work to generate an income? New Living Benefit life insurance will allow you to access a portion of your death benefit in the case of severe medical events that require in-home or long-term care as you recover. These include cancer, heart attack, stroke or other critical or chronic diseases. With the right insurance policy, you no longer have to die to get to your death benefit. In addition, purchasing insurance when you are young and healthy will get you the best insurance rates possible in your lifetime.
Think of it this way, if you do fall victim to a medical event that is serious enough to prevent you from taking care of yourself, who will pay your bills outside of what is covered by health care? Where will that money come from? Will you have to move?
Myth #2: I am too young to worry about life insurance right now.
Life insurance is one of those products that you have to invest in before you need it. If you wait until you need it, you won’t be able to buy it at any price. If you are young and healthy you can lock in a life insurance price that will stay at the same low-level your entire life. If you wait until you’re a senior and retiring in Florida you will definitely pay more and you run the risk of becoming uninsurable before you have purchased the insurance you will need throughout your life.
We mentioned living benefit life insurance in myth #1 because the average age of a person experiencing a medical condition needing living benefits is just 45 years old. That is the AVERAGE, which means half the people who experience a medical even that would justify the early payment of life insurance proceeds are younger than 45, and only half older. In addition, once you experience the heart attack, cancer or chronic illness you may become uninsurable. If you have put off buying life insurance, you will not only pay more when you stop procrastinating, but you also run the risk of becoming uninsurable or too high a medical risk for the insurance company to accept you without a substantial excess risk premium.
Myth #3: It is better to buy Term life insurance and invest the rest.
The simplest way to answer this myth is to share that the two fastest growing segments of life insurance are 1. Final Expense Insurance and 2. Indexed Universal Life.
Final Expense Insurance is permanent insurance, usually whole life insurance, typically sold in small enough increments to just cover funeral and burial costs and possibly some final medical bills. It is expensive and typically sold to the over 60 age group who were told to buy term and invest the rest. What happened? Term insurance is for temporary needs. It either expires or becomes cost prohibitive once we reach our golden years. Many of today’s seniors have not done so well in the equity market over the past fourteen years, needing all their money for income and simply do not have excess cash for burial and funeral expenses. At the same time, their term insurance purchased in the 1990’s has expired or become cost prohibitive. Without some insurance, the cost of burial and funeral will be the burden of their spouse or children. For those who still medically qualify their only option is Final Expense insurance at a relatively high cost. Many pay as much for $15,000 or $20,000 of coverage as they would have paid for more than ten times that amount of insurance when they were in their youth. If they had purchased and kept permanent insurance instead of term they would be in a better financial position.
The other popular insurance product is Indexed Universal Life. Indexed Universal Life is a life insurance product that offers the insured permanent insurance coverage along with cash value that grows when the stock market advances, but does not decline in value. Ever. The result is that consumers who invested in this life insurance product have outperformed the stock market over the past ten, fifteen and twenty year periods. That cash value can be accessed tax-free at any time, pre or post retirement. Not only have those investors performed well, they have life insurance that will boost the size of their estate on death and some have living benefits as well.
While term insurance can solve a temporary need, permanent insurance is a tool that insure your and your family’s quality of life for your entire life and beyond.
Myth #4: Life Insurance is an expense.
Life insurance is no more an “expense” than saving for retirement. When people view the money they set aside as an expense instead of an investment they tend to focus on the cost rather than benefit. When you focus on cost rather than the benefit you can lose track of the future need insurance is solving. It is that frame of mind that led many people to buy term in the 1990’s and now need relatively expensive Final Expense insurance. It’s the same frame of mind that leads people to procrastinate in buying insurance or buy too little and leave their family in a harsh financial position at their time of need.
An experienced insurance professional will help you identify your needs and then find how to solve that need within your budget. We find that when investors understand their needs and are confident in their insurance advisor, they better understand insurance as an investment that protects their and their family’s quality of life.
Myth #5: All insurance companies charge about the same for identical coverage.
In a perfect world one would think that the same product should have the same or nearly the same cost no matter what company you buy it from. However, that is not the case with life insurance, and many other types of insurance. If you don’t shop your life insurance needs with many different carriers (insurance companies) you could end up paying a lot more than you have to. Everyone should shop your insurance quote with multiple companies. We shop every policy with over fifty of the top carriers before quoting a price to our clients. Although we are based in Jupiter Florida, we offer insurance all over the country. Insurance is regulated by the state you live in, and prices can vary based on where you live and your current health.
Here is an example; looking through our system of quotes we find that the least expensive twenty-year level term policy for $500,000 of insurance considering a healthy 35-year old male is just $259 per year. This is insurance designed to cover a temporary need (i.e. extra coverage while children still live at home) where the cost is fixed for twenty-years. That same coverage that cost just $259 per year with one company cost $512 per year with another company. Both are top names and rated A+ for financial strength, but one company charges almost twice as much for the same coverage.
In another example, the same policy for a 45-year old healthy male cost (ten years older) cost just $609 per year from an A+ rated company. A second A+ rated insurer charges $1,005 per year for the exact same coverage. There is no difference between these two policies other than the cost.
Of course, in-between the least and most expensive there are dozens of prices seemingly randomly dispersed. If you want the best price, always shop or ask an independent life insurance agent to shop for you. We can pull up the prices for most every top carrier in term or permanent life, Medicare supplemental and final expense; over 100 carriers in total. Our mission, as it should be with any independent agent, is to find the best value for our customers.
The Bottom Line: When considering a life insurance purchase, keep in mind these myths and how the wrong decision could end up costing you over your life-time, or even leaving you unable to purchase the insurance you need. Keep in mind that we have over thirty-years of experience in the financial industry as an insurance professional, investment broker, analyst and portfolio manager. We can offer advice based on decades of experience in the investment and insurance arena. Talk to us or visit our web site at
We can help you make the right decision today.
Shield Insurance Solutions is independent. Our goal is to find the best insurance company and policy for you. We specialize in living benefit life insurance and work with nearly 100 different insurance companies in order to find the right policy at the right value for you. We are transparent and have been in the financial services industry since 1984. Our life products include Whole Life, Universal Life and Term Insurance and Mortgage Protection Insurance. As independent agents, we work hard to find the best life insurance company for you, with the best life insurance rates and value. We are based in Jupiter and Palm Beach Florida and licensed in almost every state. If you are shopping for a life insurance quote, we can show you what many of the top insurance companies will offer. The price differences will amaze you. Visit Contact Us to get a free life insurance quote comparison, or call us at (800) 847-9680.
