Life insurance is an extremely complicated financial product. Even shopping for a simple insurance option such as term level insurance should be thoroughly reviewed so you end up with a policy with the right level of protection and security. Once you learn the basics of life insurance, the task of choosing between policies become simpler and more straightforward. Here are some misconceptions about life insurance and the truth behind them.
- Single policy owners don’t need protection from life insurance
Single individuals with no beneficiaries also need to purchase a policy. The payout will be automatically allocated to pay for death-related expenses such as hospitalization bills and funeral costs. You may also want to give the benefits to low-income households or donate the money to charity instead.
- The maximum payout should only be equivalent to two years worth of salary
The amount of coverage will depend on individual financial situations. Apart from funeral expenses, you also need to consider outstanding debts that you may have with your creditors such as banks and lending companies.
Implement a cash glow analysis to accurately identify the true amount of a policy that you must purchase.
- Term life insurance is more than sufficient to cover needs and deliver protection
In some cases, employer-issued insurance or group insurance will be more than enough to pay for funeral and take care of outstanding debts. In some cases, you need more than term insurance. Married policy owners, or those who have kids should consider expanding coverage to ensure that loves ones may still survive comfortably even after your death.
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