Misconceptions about Life Insurance- How much do we really know about it?

What is the first thing that comes into your mind when you hear the word Life Insurance? There’s something about this word that just bothers a lot of people out. They just don’t want to talk about this topic. Perhaps because it forces them to confront the notion of dying. Death is not on their minds, buying life insurance is not their priority because it doesn’t give them an immediate tangible return. Most people are undereducated about the topic therefore a lot of “myth” has been spinning around.

Once and for all, let’s try to clear some of these misconceptions.

MISCONCEPTION 1: I don’t need a separate life insurance policy. It’s taken care of by my company.
Truth:  Having a life insurance policy through work is a great benefit, but it’s just temporary coverage. If and when you leave that company, the coverage will end. It’s called “Term Insurance”. So it only makes sense to get and  explore a life insurance policy that will stay with you no matter where and how long you work. One more thing, An employer-paid policy typically offers a coverage amount equal to one’s annual salary or a modest flat amount. A good rule of thumb is at least 10 times of your annual salary. You have to figure out how much do you really need to pay off your medical and funeral expenses, your debts like your mortgage and basic financial needs of your love ones especially if you’re the breadwinner because that may only prove insufficient.  Do not hesitate to talk to a financial advisor to know how much protection do you really need.

MISCONCEPTION 2: Life insurance is too expensive.
Truth: Life Insurance like everything else is constantly changing. Would you believe that there’s an Insurance that would cover you  P100,000 for accidental/dismemberment benefit and 25,000 for cash fire assistance for a total of P125k in 4 months for just only P125?Yes. This is true. This is called “micro Insurance” and is being offered by Cebuana Lhuillier. (I’m not recommending nor promoting this product. This is just for educational purposes.) The point is, Insurances nowadays are very affordable. In fact it is now economically designed based on the need and capability to save of many. Take this for example, if you are a healthy 20 year old man, nonsmoker, Sunlife Financial can insure you of a face amount  of P250,000 by just shelling out P1,877 every quarter for 10 years and that is just how much, only P20 a day!

MISCONCEPTION 3: People in less than adequate health can’t get life insurance.
Truth: This may sound true because after all Life Insurance is a risk sharing business. If you are too much a risk for a company then you ay no longer take advantage of this financial instrument. But there are life insurance companies in the market that are willing to sell policies to people with a range of common medical problems. Yes, the coverage will probably be way more costly than it would be for someone in perfect health, but there are companies that is more than willing to work with you in order to accommodate your needs. You just have to be honest with your health upfront.

MISCONCEPTION 4: Life insurance is only necessary for those with dependents.
Truth: Even if you’re not married and don’t have children, you should still consider the need of having  a life insurance. Others may still depend on you, such as your parents and siblings. Unless you want to be a burden to them in case something bad happens to you. Always remember, you have an economic value for someone else.

MISCONCEPTION 5: I’m young, and not planning on dying any time soon. I can wait to get insurance.
Truth: No one could claim what lies ahead. Life has full of uncertainties. Death is certain. We just don’t know when and how. Life Insurance gives certainty to uncertainty.
Life insurance, like all insurance, is the type of product you have to buy before you need it. That means the time to purchase life insurance is when  you’re young and healthy.
If you wait, and you develop a serious medical problem, you may not be able to get the coverage you want. Life insurance is always based on your age . Always remember, the older you get, the more expensive it becomes. Even just one year older means higher rates.

MISCONCEPTION 6: Your family can only benefit from your life insurance policy after you die.
This is what’s stopping most of the people that I have talked to and this belief of someone is my signal that such person really need to educated.
Truth: Life insurance policies like what I’ve said has greatly improved over the time. Compare as before that you can only get the benefit once you die, most of the Insurance now in the market offer a number of “living benefits,” including the ability to access the policy’s cash value through withdrawals or tax-free loans for other needs, such as funding a child’s education, a hard earned retirement or other lifelong savings need. So to simply put, it works just like a savings account that could potentially earn higher with a supreme feature! And guess what that is? GUARANTEED DEATH BENEFIT for your love ones.

MISCONCEPTION 7: Once you buy a life insurance policy, you can stop thinking about it.
Truth: You have to periodically review your policy. Life is constantly changing. Say you got your policy 10 years ago, when you were still single and healthy. Most likely your situation is very different now. Positive changes in your health can sometimes lower your premiums, and policies with loans and withdrawals should be monitored. The point here is, you always have to make sure that your policy still fits on your needs.