May 2, 2017

Life Insurance Myths

The decision on whether to buy life insurance can be a tough one. Not only that, once you’ve decided to buy it you might feel lost in deciding which product to invest in.
Nevertheless, one thing remains – you want to make sure your family will be taken care of in the event you are no longer here.

Nobody needs to be confused about life insurance, so we’ve debunked the most common myths about it below.

As always, our brokers are here to help you choose the right product, fit perfectly for you.

MYTH: If you have health pre-conditions you cannot get a traditional life insurance policy.

TRUTH: Even with some pre-conditions, you can apply for a “rated” policy, which is typically more expensive than a standard policy.

MYTH: If you are single, you do not need life insurance.

TRUTH: Many people get life insurance to protect their families. Even if you are single, there will be numerous expenses that relatives will have to deal with, insurance will help defray costs.

MYTH: Life insurance is expensive.

TRUTH: Life insurance can be very cheap. For example a Term life insurance policy for a non-smoking , 35 year old female can cost as little as $17 a month for $500,000 coverage.

MYTH: Insurance brokers don’t care what product they sell you.

TRUTH: Good brokers will try and find you a product that fits your financial planning and is also within your financial means. Bad brokers may want to sell you a more expensive product since they are compensated on the type and cost of the product.

MYTH: Insurance agents and brokers are the same.

TRUTH: They are not. Agents work for one insurance company, get a regular salary and bonuses based on sales. Brokers do not work for one insurance company and are far more independent.

MYTH: Your beneficiaries must pay tax on life insurance death benefits.

TRUTH: No, life insurance death benefits are exempt from taxes. If your estate is beneficiary, there is no tax, but money is subject to probate fees.

MYTH: Life insurance that renews automatically will renew at a similar rate.

TRUTH: Insurance policies typically renew at a higher rate, since insurers will build inrate increases to account for the potential deterioration of your health.

MYTH: If you purchased a particular type of policy, you are stuck with it until the end.

TRUTH: There are products that are convertible policies that can be converted to other types prior to a certain age without medical underwriting.

MYTH: Mortgage life insurance is similar to traditional life insurance.

TRUTH: Mortgage life insurance only covers your outstanding mortgage amount, which usually means in later years you still pay the same rate for a lower coverage. It is also important to know that mortgage life insurance uses a blended rate for smokers and non-smokers, if you are a non-smoker you are probably overpaying.

MYTH: If you have group insurance through your work, it is enough.

TRUTH: Often group insurance is not enough as it does not offer high coverage. At the same time, you need to consider that you might lose the plan if you leave the job. Independent life insurance is a better idea.

MYTH: All life insurance plans have health questions.

TRUTH: Guaranteed issue plans have no health questions but the face amounts are low and premiums are high.

MYTH: All term policies increase in cost.

TRUTH: Term 100 policies has a level cost for life.

MYTH: Buying life insurance for a child makes no sense.

TRUTH: Buying insurance for a child allows the child to lock in at a low rate and the policy can be paid up in a limited number of years.