With the increasing uncertainty of these times, life insurance from a reputable provider is a top priority for people of all ages. Insurance plans available today range from basic policies that most people are already familiar with to hybrid life insurance policies designed to fit long-term care needs.
There are many misconceptions surrounding life insurance. You might think the whole market is a sham and can’t be trusted. Perhaps you understand the importance of having a good policy, but keep procrastinating and setting one up. We’ll debunk some of the most common myths about life insurance and see why getting the right policy is so important.
Gaining Clarity for Informed Financial Protection
Myth #1– If You Have Health Problems, You Can’t Get Life Insurance
Many people believe that preexisting conditions make it impossible to get life insurance. Chronic health conditions can make building a plan more complicated, but there are options.
If your health problem is managed and you can show a stable health history, finding health insurance may be easier than you think. Plus, there are ways to use your life insurance policy to help your health while you are still alive.
Riders are features you can add to your policy. These are important if you have chronic health issues. For example, you can add a rider to your policy to help if your illness worsens. These riders are often called accelerated death benefits.
Some policies waive medical exams. These policies are considerably more expensive than typical policies but are worth considering. Life insurance companies rely on accurately weighing risk in their policyholder, but waiving a medical exam changes their ability to calculate your risk.
Know that if you can prove your condition is common and well-managed, you can negotiate a reasonable premium for a good plan. Practice good health habits in your life and discuss this with your insurance agent.
Myth #2– Senior Citizens Do Not Need Life Insurance
The myth that older people do not need life insurance is also closely tied to the idea that senior citizens can’t qualify for life insurance. With lifespans lengthening worldwide, life insurance for the older population is an interesting issue.
Most people who take out a life insurance policy earlier in their lives reach a point where they no longer have dependants at home and have paid off their mortgage.
For term policies, your insurance will simply expire. If your term policy expires, but you have no assets to assist your family in handling your end-of-life expenses, you have options. You can look into extending your term policy year by year.
You may want to keep your universal or whole policy to save yourself the possibility of steep taxes and possibly putting yourself in a different category of Medicare. For these reasons, most universal policies offer riders for outliving the maturity of your policy.
Senior citizens should also look into final expense insurance. If you don’t have many assets to leave your family to pay for whatever funeral or burial you desire, it can be a burden. Even cremation costs can accumulate a considerable price tag.
Myth #3– All Life Insurance Accrues Cash
Cash dividends are some of the most rewarding benefits of a life insurance policy. When you pay a monthly premium, it’s nice to know that money stays with you to a certain extent. But not all policies are set up this way.
You may be familiar with the terms whole and term life insurance, but did you know term life insurance does not build cash value? Term life insurance is much cheaper than whole life insurance but does not offer as many benefits.
If you have or are interested in a life insurance policy that accrues cash value, make sure you understand the federal tax implications of the policy. Most of the time, the cash value is not taxable, but interest earned might be subject to federal or state taxes.
Term life insurance is like a monthly membership for a designated number of years that gives you promised benefits for your dependents when you die. The other benefit of whole life insurance is that it can gain dividends which your company can share with you.