Recognizing life insurance myths and truths will help your clients make wise decisions. Separating fact from fiction allows you to determine when life insurance should be part of your clients’ comprehensive financial planning and to keep their plans for the future on track.

Myth 1: “I don’t need life insurance. I’m single.”

Truth: Life insurance is actually a good idea for many single people if you think of it as something other than income replacement:

• Elderly parents who depend on you for their care (or will in the future)
• Funds for a niece or nephew
• Financial contribution to an alma mater or beloved charity
• Value apart from death benefit. Universal life insurance, for example, builds up cash values that can be used for business opportunities or to supplement retirement income.

Myth 2: “Life insurance costs too much.”

Truth: People tend to overestimate the cost of life insurance. Term life insurance (which lasts for a specified period of time) is one affordable option for your clients to get valuable life insurance protection. In the 2015 Insurance Barometer Study by LIMRA & Life Happens, 80% of respondents overestimated the yearly cost for a $250,000 20-year level term policy for a health 30-year-old:

$156! A far cry from the misperceptions. Awareness matters.

Myth 3: “I have to buy a separate policy for each child I want to insure.”

Truth: One of the primary benefits of life insurance is its customization factor. Parents are often able to purchase riders to cover children, adding layers of protection and benefits that are not part of the standard policy.

Myth 4: “I can't get life insurance because I’m a senior citizen.”

Truth: The dramatic increase in average life expectancy during the 20th century ranks as one of society’s greatest achievements. Life insurance companies have kept up with that pace, increasing their max age limits along the way to allow older clients who may not have planned sooner to be insured, saving their family members the financial burden of handling final expenses and offering them the opportunity to provide a legacy to those left behind. Universal life insurance policies, for example, are available to clients up to age 90.

Myth 5: “As a stay-at-home parent, I’m not drawing pay, so I don’t need life insurance.”

My wife is a part-time adjunct professor, and the full-time CEO of the Maurer family. Stay-at-home parents like her provide valuable contributions to a household even though they may not earn a paycheck (or a big one). Without them, surviving spouses may need to pay for some or all of these services that were performed with no financial compensation. Life insurance gives surviving spouses the necessary resources to continue their standard of living. Salary.com’s 2014 “Mom Salary” survey – conducted with 15,000 moms – gathered the 10 most time-consuming jobs, applied salary data, factored in the number of hours worked including overtime, and arrived at an estimated annual salary:

$118,905

Myth 6: With my term policy, if I still need protection when the term policy ends, I can always renew it.

Truth: Since term life insurance offers the greatest coverage for the lowest cost, it’s popular with young families. It’s designed to protect needs that will disappear after a specific period of time (mortgage, child’s education). But even after the mortgage is paid off and the kids are grown, the need for insurance continues for most people; to provide income to a surviving spouse, eliminate debts, pay taxes, etc. Because premiums increase with age, renewing a policy when the term expires can be cost-prohibitive, and poor health may make renewing impossible.

Myth 7: I can get a better rate of return if I invest my money elsewhere.

Truth: The most important reason to purchase life insurance is to provide protection for loved ones. Permanent insurance also provides cash value accumulation that grows over time and can be borrowed against or withdrawn in times of crisis. And, contrary to what most people believe, long-term rates of return on cash values are generally comparable to relatively low-risk investment products.

September is life insurance awareness month. We hope you share these life lessons with your clients. And we’re here year-round to provide you and your clients with tools and knowledge to help them make wise decisions.

Mark Maurer