Watch For These 10 Life Insurance Myths
Life insurance is not a simple product. Even term life policies have many elements that must be considered carefully in order to arrive at the proper type and amount of coverage. But the technical aspects of a life insurance policy are far less difficult for most people to deal with than trying to determine how much life insurance coverage they need in Akron Oh.
This article will briefly examine the 10 most common misconceptions surrounding life insurance and the realities that may be distorted.
Myth No.1: I’m single and don’t have any dependents, therefore I don’t need any coverage. Even a single person needs at least enough life insurance to cover the costs of personal debts, medical and funeral bills. If you are uninsured, you may leave a legacy of unpaid expenses for your family or executor to deal with. Plus, this can be a good way for low-income singles to leave a legacy to a favorite charity or other cause.
Second Myth: I’m single with no kids, with that being said, why should I spend money on life insurance? As a single person, there are still your final expenses, that is reason enough to have life insurance. If you are uninsured in Akron Ohio, you may leave a burden of these expenses for your family or executor to deal with. Moreover, this can be a good way for low-income singles to do something good for their favorite charity.
Third Myth: My life insurance coverage, through my employer, is sufficient. This could be. For a single person and few bills, employer-provided term coverage is probably enough. But if you have a family, with kids, your needs may be greater. Plus, in most cases, that employer plan does not go with you when you leave that job.
Fourth Myth: I can deduct my premiums from my taxes in Akron Ohio. This is not true, in most cases. The personal life insurance premiums are never deductible unless the policyholder is self-employed and the coverage is used to insure his business. Then the premiums are deductible on the Schedule C of the Form 1040. With that said the death benefit could be taxed. So be careful.
Fifth Myth: I need to have life insurance no matter what the cost. In some cases, this is probably true. However, if you have no debt or dependents and enough assets you may be better off self-insuring. If you have no debt and medical and funeral costs are covered, then your need for life insurance is eliminated.
Sixth Myth: I should have some life insurance no matter what the cost. In some cases, this is probably true. With that being said, if you have no debt or children and enough assets you may be better off self-insuring. If you have no debt and medical and funeral costs are covered, and then there is no need for life insurance.
There is also the chance of being uninsurable, which could be disastrous for those who may have estate tax issues will use life insurance to pay them. But this risk can be eliminated with permanent coverage, which can become paid up after a certain amount of premiums have been paid and then remains in force the rest of your life.
Seventh Myth: Straight universal life policies, in Akron Ohio are always inferior to variable universal life policies. Many universal policies pay competitive interest rates, and variable universal life (VUL) policies contain several layers of fees relating to both the insurance and securities elements present in the policy. Therefore, if the variable sub accounts within the policy under perform, and then the variable policyholder may well see a lower cash value compared to someone with straight universal life policies
Poor market performance can even generate substantial cash calls inside variable policies that requires additional premiums to be paid in order to keep the policy in force.
Eighth Myth: Variable universal life policies are always superior to straight universal life policies. Many universal policies pay competitive interest rates, and variable universal life (VUL) policies contain several layers of fees relating to both the insurance and securities elements present in the policy. Therefore, if the variable sub accounts within the policy under perform, then the variable policyholder may well see a lower cash value than someone owning a straight universal life policy.
Ninth Myth: When purchasing term in Akron Ohio always add the return of premium (ROP) benefit. There are several different levels of ROP riders available for policies that offer this feature. Some financial advisors will tell you that this rider is not cost-effective and should be avoided. Whether you include this rider will depend on your risk tolerance and other possible investment objectives.
A cash flow analysis will reveal whether you could come out ahead by investing the additional premium amount, of the rider elsewhere, instead of putting it into the policy. Riders are available to provide additional benefits that help you customize your policy.
Tenth Myth: I will be better off investing my money than buying life insurance of any kind. Complete nonsense. Until you reach the breakeven point of asset accumulation, you need life coverage of some sort, barring the exception discussed in fifth myth. Once you amass $1 million of liquid assets, you can consider whether to discontinue, or at least reduce, your million-dollar policy. But you take a big chance when you depend solely on your investments in the early years of your life, especially if you have dependents. If you die without coverage for them, there may be no other means to provide for them after the use of your saved assets.
In conclusion, these are just some of the more prevalent misunderstandings concerning life insurance that the public faces today. The key concept to understand is that you shouldn’t leave life insurance out of your budget unless you have enough assets to cover expenses after your death.
Tags: Final Expense Insurance, Final Expense Insurance Akron OH, financial planning, Insurance Quote Akron OH, Insurance Quotes, invest, Investing, life insurance, mmo, money, Personal Finance, rates, Term Insurance Akron OH, Term Life Insurance Akron OH
