Life insurance may seem simple, but that is not always the case. Even when buying the most basic policy, which is called term life insurance, you still have to consider the appropriate time and level of coverage. To make things a bit easier, here we dispel three common myths about life insurance.
Myth #1: You do not need coverage because you have no dependents. Some people think they only need life insurance if they are the primary breadwinners in their families, but that thinking is outdated. Yes, life insurance is often used to cover your salary if you pass away. But life insurance can also be used to cover personal debts and end-of-life expenses, such as a funeral service.
Myth #2: You have employer-paid coverage, so you do not need any additional life insurance. This may be true, but it may not be. How much insurance does your employer provide? If you have dependents, you may need more life insurance than your employer provides. And what will you do for insurance if you leave that employer for any reason? Will the insurance come with you? You may need a supplemental policy outside of your employer to ensure full coverage regardless of your employment circumstances.
Myth #3: Your coverage should be a multiple of your annual salary. Traditional wisdom often says that your life insurance coverage should be around twice your annual salary. But how much life insurance you need should be computed based on outflows, not inflows. Your life insurance needs depend not on how much money you have earned and accumulated but on how much you spend.
There are other considerations when purchasing life insurance, of course; these are just a few factors among many that you may want to consider.
We can provide additional input and help you choose the right life insurance policy to keep your family properly protected.