In this new series, I’d like to spend some time addressing common myths and misconceptions about your personal finances.
First up is the topic nobody likes to discuss – life insurance!
Myth 1: I don’t need to buy life insurance because I have coverage at work.
Facts: Most work-provided life insurance only covers 1-2 times your base salary. Even plans that allow you to buy more often cap that amount at 5x-7x your base salary.
If you can’t retire in 2 years, then your family can’t maintain their lifestyle on your work-provided life insurance. Besides, if you are diagnosed with a terminal illness, you face a painful decision:
- Do I stay at work these last few months so my family gets this life insurance (assuming you can even work), or
- Do I quit to spend time with them but lose the insurance?
The answer: buy your own life insurance, and get help determining the proper amount and type. That way you have control. Employed or not, you have the protection your family needs.
Myth 2: If I shop online for life insurance I can get it cheaper.
Facts: The cost of a particular life insurance policy is set by the insurance company, not the agent selling it. If you work with a life insurance agent or broker, the price they give you is the same price a website can give you. The only difference is that the commission for the sale of the insurance goes to the website, not to an agent.
I say this as someone who doesn’t sell life insurance: get a referral to a trustworthy agent. I’d be happy to provide one. They can help you find the right coverage, with the right company, and the right features, for the same cost.
Myth 3: I can’t afford the premiums for the amount of life insurance I need.
Facts: Most people can find the money if something is important enough. If you needed a life-saving medication costing the same as a life insurance premium, could you find the money in your budget? Many times “I can’t afford it” means “I don’t think it’s important enough”.
I’m going to say something that might surprise you – reduce your retirement savings if you have to. Yes, you might need to work a few more months at the end of your career. But you provided a critical protection to your family in return. If you were to pass away, which choice do you want people to know you made?
I hope you found this helpful and re-framed some of your perspectives on life insurance!