Life Insurance isn’t a simple product. Even term life policies have many elements that need to be considered carefully in order to arrive at the proper type and amount of coverage you need. But, the technical aspects of life insurance are far less difficult for most people to deal with than trying to get a handle on how much coverage they need and why. In this article we are going to cover general life insurance myths / questions to help you take out the right policy for you.
Life Insurance Myths:
Myth #1: “I’m single and don’t have any dependents, so why do i need life cover?”
Single people with no children often don’t need life insurance because no one is relying on their income. But there are some reasons why you might still need life insurance if you single. If you died who would pay for your funeral? With a small plan and a death benefit these costs could be payed. An alternative is a funeral cover plan which covers all the costs associated with a funeral. Furthermore if you don’t have a policy you could leave your family (Parents and relatives) with unpaid expenses to deal with. Having life insurance when single is also a good way to leave a lump sum to your parents who might be struggling or to a charity or friend of your choice.
Myth #2: “My life insurance coverage only needs to be twice my annual salary?”
The amount of life cover you need completely depends on your specific situation. There are many factors to consider. In addition to medical and funeral bills, you may need to pay off debts such as your car and/or home for several years. Furthermore you will need to leave behind enough money for your family to survive comfortably without you. A cash flow analysis is usually necessary in order to determine the true amount of insurance that must be purchased the days of computing life coverage based only on one’s income-earning ability are long gone. Or a simple alternative to woking out how much cover you need can be done with Likemoney’s Life Insurance Calculator.
Myth #3 : Only Breadwinners Need Life Insurance Coverage
Nonsense. The cost of replacing the services formerly provided by a deceased house wife/husband can be higher than you think, and insuring against the loss of a wife/husband may make more sense than one might think, especially when it comes to cleaning and daycare costs.
Myth #4: “I’m Better off Investing My Money Than Buying Life Insurance of Any Kind ”
Absolutely not. Until you reach the break even point of asset accumulation , you need life coverage of some sort. Once you amass R1 million of liquid assets, you can consider whether to discontinue or at least reduce your million-rand 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 already. If you die without coverage for them, there may be no other means of provision after the depletion of your current assets.
We hope that these life insurance myths helped answer most of your questions. For any further questions, comment in the tab below.