When it comes to life insurance, do you know fact from fiction? Not knowing the facts may leave you and your employees wondering why you need life insurance in the first place. Particularly during a pandemic, the uncertainty and rapidly changing information that is available can lead to misunderstandings about what is true and what is false.
We’ve listed the 11 common misconceptions about life insurance below. Read on to learn fact from fiction and why life insurance should play an essential role in your overall financial plan.
Myth #1. If I get the COVID-19 vaccine, I won’t be able to get life insurance coverage. Recently, we learned that misinformation is being spread through social media, claiming that individuals who receive the COVID-19 vaccine will not be able to get life insurance or may be denied their disability or life insurance benefits. These claims are false. Receiving the COVID-19 vaccine will not affect your insurance coverage or your benefits. In fact, the Canadian Life and Health Insurance Association (CLHIA) emphasizes that “As with any medication approved for use in Canada, the COVID-19 vaccines have been found safe and effective through Health Canada’s independent scientific and medical assessment process.”
Myth #2. I just don’t see the need for life insurance. Your outstanding financial obligations will remain, even after you’re gone. Whether it’s a mortgage, car loan, accumulated credit card or student loan debt, life insurance can help cover your outstanding financial responsibilities should you die unexpectedly. If you are a dual-income-earning family, your income will be lost. Can your spouse provide for your family in the same manner? And what about funeral costs?
Myth #3. I’m young. Why would I spend my money on life insurance now? Being young often means you’re more active, which could leave you more at risk than someone in an older age group. Your body may be younger and less likely to break down, but your activities may be putting you in the same risk category as older, less healthy people. Plus, obtaining coverage at a younger age allows you to lock in a low premium.
Myth #4. I’m a stay-at-home parent. There is no need to replace my income as there’s no income to replace. If you’re a stay-at-home parent and you pass away, will your spouse be able to afford childcare? If you’re a single parent, your relatives or friends may not be able to take care of your children in a way that allows them to parent in the same style or be able to afford post-secondary education.
Not having an income and staying at home means you are saving money you would be spending from a spouse’s income—or from any other source of income—on childcare and tending to your home. When you’re gone, those things still need to be covered, and life insurance can do that for you.
Myth #5. Why do I need life insurance? My children are all adults, and my house is paid off. Everyone has daily living expenses. Just because the home is paid off doesn’t mean there aren’t other financial obligations that your spouse would be responsible for, including any debt you acquired together later in life and the cost of final expenses. Consider that your spouse may outlive you by decades. Will they be able to afford an assisted living centre when they’re no longer able to take care of themselves? Life insurance can help you ensure that your spouse will continue to live with the same financial security they enjoyed as a dual-income family.
Myth #6. I’m a smoker. Insurance companies won’t consider insuring me. Being a smoker doesn’t mean you can’t get coverage. Your premium will be a bit higher than the premium for someone who doesn’t smoke, but it is more affordable than you may think. Some insurers even offer a lower cost incentive if you plan to stop.
Myth #7. Even if I quit smoking, insurance companies will always consider me a smoker and charge me a higher premium. Most insurance companies consider you a non-smoker if you’ve stayed away from cigarettes for at least a year and will reduce your premium after one year of not smoking as long as no new health issues exist. You simply need to apply to have your rate reduced.
Myth #8. Life insurance seems too good to be true. It can seem that way, but it’s not. You’re covered as long as you regularly pay the premium. Whether that’s until your kids move out or until your home is paid off, you decide how long you want to keep the coverage.
Myth #9. It is a hassle to obtain life insurance. Finding life insurance isn’t as hard as you think and getting a life insurance quote is quick and effortless. All you need to do is provide basic information about yourself, including your height, weight, age, gender and smoking status. Once you have a quote, you can choose the right coverage for you. Skilled advisors guide you through the needs-based analysis, and most insurance companies offer electronic applications, so obtaining coverage is even easier from the comfort of your home.
Myth #10. I get life insurance through my employer. Why would I need more? The life insurance you get through your job may not be adequate coverage. You should compare your family’s living expenses with your coverage to see if it’s enough to cover all your family’s needs. Make sure you keep future responsibilities in mind, like being able to pay for your children’s education after you’re gone.
Your employer-paid coverage may also have a maximum coverage limit, which is the maximum amount your employer will pay out upon your death. Most experts suggest obtaining coverage five to eight times your yearly salary. What will your family do if you’re only covered for half that amount? Plus, if you change jobs, you may be leaving your coverage behind.
Myth #11. My mortgage lender provides me with coverage. Isn’t that enough? Your mortgage isn’t the only expense your spouse or children will have to take care of if you pass away—there are cars, college education, food, medical expenses, funeral costs, the list goes on. Life insurance can cover those for you. The coverage through the bank decreases as the mortgage is paid. It will not offer any residual benefit to cover your other expenses.
Still have questions?
No one wants to think about it, but death could leave your loved ones unprotected without a plan in place. Investing in your family’s financial protection early on and talking with a licensed professional can help answer your questions and dispel any myths.
Contact your Cowan Consultant today for more information.