Having life insurance provides peace of mind and can help individuals feel financially secure. However, according to research from LIMRA, 41% of Americans say they don’t have sufficient life insurance coverage, and at least 106 million Americans live with a life insurance gap.
Here are a few top misconceptions we hear about life insurance and how to address them with your clients to help them make educated decisions about their financial future.
Misconception #1: Life insurance isn’t needed if I’m young, healthy and single with no dependents.
Reality: When you’re young is the best time to purchase life insurance.
Life insurance is often seen as needed only by those who have a family, a house or other financial obligations. But those who don’t fit that bill still can benefit from life insurance. Life insurance can help take care of debt or pay off student loans and funeral expenses.
Also, being young and healthy when you apply for a life insurance policy gives you lower premiums. It may not be easy to foresee the lifelong need for life insurance, but the sooner you get life insurance, the less expensive it will be.
Misconception #2: Life insurance is expensive.
Reality: Life insurance is the simplest, most affordable way to help ensure security and peace of mind.
Many people overestimate the cost of life insurance and therefore don’t buy it. The cost of a policy depends on factors such as age, health, policy type and amount of coverage. But it can be as affordable as $170 per year (roughly $14 a month) for a healthy 30-year-old to get term life insurance, according to LIMRA’s 2022 Insurance Barometer.
Misconception #3: Life insurance benefits my loved ones only after I’m dead.
Reality: Life insurance has more uses than just death benefits.
Consumers recognize that life insurance is a way to support loved ones financially following the insured person’s death. It’s lesser known that policyholders may be able to use their life insurance while still alive.
A living benefits rider allows you to access insurance policy funds while they’re still living, under certain conditions. If you’re certified as permanently chronically ill, the rider may pay you a lump-sum or monthly payment deducted from your total death benefit.
You also can access the cash value accumulated from having a permanent life insurance policy by withdrawing and borrowing from the policy’s cash value as needed under certain accessibility options.
Misconception #4: Life insurance isn’t needed after you retire.
Reality: Retirees can benefit greatly from life insurance.
As you enter retirement, it's possible that your life insurance needs while you were working are no longer relevant. Your children may have grown up, you may have finished paying off your mortgage, etc. Retirees still can use life insurance in various ways, including covering outstanding debt and medical costs, creating an inheritance, replacing retirement income and paying final expenses.
As mentioned previously, cash value accumulation through permanent life insurance policies can also be accessed while in retirement, which can supplement your retirement income or offset different expenses.
Myth #5: The life insurance I get through my job is enough.
Reality: Most employer-sponsored plans don’t provide total coverage.
More than 100 million Americans have an employer-sponsored life insurance plan, which is typically very affordable or even free. However, most plans don’t provide total coverage to meet financial needs. Even if your company offers a life insurance package that matches your salary, many people use 10 times their annual salary as a minimum rule of thumb for their policy.
Plus, most employer-sponsored plans aren’t “portable,” so employees lose coverage if they change jobs or retire.
Life insurance is more relevant and accessible than consumers believe it to be. It’s a matter of educating your clients to help them understand the benefits it brings to lead them to a financially secure future.
Nathan Richardson is senior vice president, consumer division, CNO Financial Group. He may be contacted at [email protected].