Category: Securing Your Family's Future article

The Truth About Life Insurance: 9 Common Myths Debunked With Helpful Facts

For many Americans, life insurance can be difficult to discuss, making them hesitant to purchase a policy. Can you relate? Without a policy, however, your loved ones could experience financial hardship in the event of your passing. To help, we’ll debunk common myths with straightforward life insurance facts—all with the goal of helping you make an informed and confident decision about getting life insurance.

1. Myth: Life insurance is too expensive.

Fact: A policy is more affordable than you may think.

According to data from the 2020 LIMRA Insurance Barometer Study, consumers tend to overestimate the cost of a life insurance policy by nearly three times the actual cost.1 When asked what the annual average premium for $250,000 in coverage for a healthy 30-year-old, consumers estimated $500, when in reality it’s closer to an annual average of $142 for females, and $160 for males.2

If you don’t have life insurance now, you won’t regret securing a policy for your loved ones. Life insurance can help give you peace of mind. Don’t wait—it takes just 12 months or less for family members to feel the financial impact of losing a loved one.3

You and your family will benefit from learning about your options and the simple steps it takes to secure a policy that best suits your needs. See how affordable life insurance can be by getting a free quote online today.

2. Myth: I don’t have kids now, so I don’t need life insurance.

Fact: Life insurance is important, even if you don’t have children.

If you don’t have kids, you may want to get life insurance, especially if you’re married, in a partnership or taking care of aging parents. In fact, the main reason adults 25 to 34 start shopping for life insurance is because they got married.3 If you have kids later, you can update your coverage to ensure you have enough.

Life insurance can help your loved ones cover bills, such as a mortgage, pay off any debts, like student loans, and maintain their standard of living after you pass. With the median monthly mortgage payment at $975, it’s easy to see why you should make room for life insurance.4

3. Myth: I’m young and healthy, so I don’t need life insurance.

Fact: It’s wise to get life insurance when you’re young. Plus, it could save you money.

One of the best times in your life to buy life insurance is when you’re young and healthy. Here’s why: Life insurance policies can be less expensive at that time. If you buy a policy now, you can save money in the long run because the cost of life insurance increases as you get older. If you’re planning to get married and have children in the future, it makes sense to lock in your rate while you’re young and healthy.

Locking in coverage today is a great way to care for the people who would depend on you financially in the future. Take our quiz online to find out if you need life insurance.

4. Myth: As a stay-at-home parent, I don’t need life insurance.

Fact: The loss of a stay-at-home parent could have significant financial impacts.

According to 2019 data from Salary.com, the average stay-at-home parent’s salary is $178,201, based on the value of the tasks they perform.5 If you’re a stay-at-home parent now, are you aware of the value of your work? And based on the salary above, could your family afford to hire someone to help with all of the tasks you currently perform? For many people, the answer is no.

Some of these tasks may include:

  • Childcare
  • Food preparation
  • Yardwork
  • Tutoring and homework help
  • Cleaning
  • Transportation and carpools

A stay-at-home parent’s work has monetary value even though it doesn’t come with a traditional paycheck. Without life insurance, your family might be left without the resources to care for your children in the same way, in the event of your passing. That’s where life insurance can help play a role to financially protect your family and allow your children to maintain the same quality of life.

5. Myth: Most Americans with coverage have enough life insurance.

Fact: Many people are underinsured, and they have no idea.

The American Council of Life insurers recommends that Americans purchase a policy with a value equal to seven to 10 times their annual income.6 Do you have that amount of coverage? For most people, the answer is no. Here are a few reasons you may not have enough coverage:7

  • You only have life insurance through your employer, which may not cover all of your financial needs if you pass away.
  • You had children, but never adjusted your life insurance policy.
  • You bought a term life policy which ended or will expire in the near future.

Remember, you may need enough life insurance to:

  • Pay for a mortgage
  • Provide for a spouse or partner, children and aging parents
  • Protect your income and cover daily costs
  • Cover the cost of a funeral, and burial or cremation

It’s always a good idea to check your policy and discuss with a life insurer your current coverage needs.

6. Myth: It’s tough to know how much life insurance I need.

Fact: An insurance professional can help you understand coverage.

It’s important to have a life insurance policy in place to protect your family. When you’re ready to get a policy, an insurance professional can help you understand how much insurance you may need and walk you through the steps to take.

You’ll want to discuss several important factors that help determine the coverage you need, including:

  • Your current income

    You should carry coverage that’s at least seven to 10 times your annual income.6 This rule of thumb is a good way to estimate the amount of coverage you’ll need to help ensure your family can maintain their standard of living without your income.

  • The term of your mortgage

    If you have a 30-year mortgage, purchasing a 30-year term policy that’s equal to or more than your mortgage amount can help your loved ones pay for this expense if the unexpected happens.

  • Your costs for childcare, education and household needs

    Having the right amount of coverage can enable your family to stay in their home, pay for childcare and household needs, or even help save for college expenses.

  • Any family members who may depend on you

    Whether you’re taking care of aging parents or adult children, it’s important to have coverage in place to help protect them.

  • Coverage for final expenses

    Funerals and final expenses can be costly—having coverage in place can help alleviate the financial impact on your family.

The list above is not meant to be exhaustive, as everyone has different needs to consider when determining the right amount of life insurance. When you speak to an Amica insurance representative, they can help recommend the right amount of coverage for your unique situation.

7. Myth: I don’t need life insurance if my children are grown.

Fact: If you’re an empty nester, you may still need life insurance.

As your children leave home, your financial priorities shift, but there may still be a need for life insurance. Did you know 40% of empty nesters still help their adult children pay for expenses? Plus, 60% of them expect their children to move back home at some point.8

Whether you’re supporting a child who has recently left the home, or one who is at home and between jobs, coverage can help financially protect the people who rely on you. It can also help if you care for an aging parent or another family member who needs support.

Not only does life insurance cover the costs of daily expenses and a mortgage, but it can also help pay outstanding debt. On average, a person who dies has $61,554 in debt.9 Fortunately, life insurance can help provide financial support for family members who are left to pay off this amount.

8. Myth: I have life insurance through my employer, so my family is already covered.

Fact: You shouldn’t rely solely on employer-based life insurance.

More than half of employers offer life insurance benefits to help attract and retain top employees.10 Even though group life insurance is an excellent benefit, it shouldn’t be your only form of coverage. Here’s why:

  • It’s probably not enough coverage.

    Most insurance experts recommend purchasing a policy that covers seven to 10 times your income to adequately cover your loved ones.6 Meanwhile, the average group life policy only covers up to $100,000, which is the recommended amount for someone earning only $10,000 a year.11

  • You may lose coverage if you change jobs.

    Most group life insurance policies end if you leave your job. If you decide to convert your policy to an individual policy (in order to take it with you), then it may significantly increase in price.12

  • Your options are limited.

    Generally speaking, most group life insurance policies offer less coverage than individual policies. To get a policy that will truly protect your family, it’s best to seek additional coverage on your own to supplement your group policy.12

First, take a close look at your group policy coverage and determine what you’re intending it to cover. Do you think it will fully cover your loved ones if you’re no longer there? For most people, the answer is no. If you only have a group policy, take time to secure additional coverage. You won’t regret adding another layer of protection.

9. Myth: Life insurance doesn’t benefit me. It’s not worth the expense.

Fact: Life insurance benefits your loved ones. It is worth the expense.

True, life insurance isn’t designed to benefit you; rather, it’s there for your loved ones. But it absolutely is worth the expense. If something were to happen to you, it’s important for your loved ones to be taken care of. After all, losing a family member is incredibly stressful. Your loved ones don’t need the added stress of financial struggles, a move or other lifestyle changes.

If you’re included in the 54% of U.S. households that rely on dual incomes, losing one income could be harmful to the household. According to the latest Insurance Barometer Study, it doesn’t take long for financial hardship to affect families, with 42% of families impacted within six months and a quarter affected financially within a month.13 

If you’re concerned about the cost of buying life insurance, you can also talk to an insurance professional to ask for ways to lower the cost of your premium. Usually, there’s a way for you to obtain some level of insurance that also meets the needs of your budget. And above all, remember that paying for insurance now is far less than the funds your family will need if you’re no longer there.

Key takeaways

  • Most people tend to overestimate the cost of life insurance. It’s actually more affordable than you may think.
  • Even if you don’t have kids now, you may still want to purchase a life insurance policy. It can benefit your spouse or partner, or other loved ones.
  • In general, life insurance is more affordable when you’re young and healthy. Don’t delay getting coverage.
  • Stay-at-home parents need life insurance, too. If they pass away without coverage, a family will need to pay money for childcare, household duties and more.
  • Empty nesters and people with grown children still need life insurance coverage. Not only may they still need to provide for their grown children, but they may also want to leave a legacy or set aside money for end-of-life care.
  • Usually group (employer-based) life insurance is not enough coverage. It’s important to purchase an individual policy in addition to securing coverage through work if it’s offered. This way, you’ll always have coverage, even if you switch jobs.
  • Life insurance benefits your loved ones, whether it’s your spouse, partner, children or other family members. It’s designed to help them live comfortably in the event that you are no longer there to help provide for them. Purchasing life insurance is one of the most loving acts you can do for your family.

An Amica life insurance representative can easily help you understand how much life insurance coverage you may need. Learn more or get a free online quote today.

 

  • 2020 Insurance Barometer Study, LIMRA and Life Happens, 2020.
  • Sample monthly premiums for 20-year Term Life insurance with $250,000 coverage shown for a Female and Male at age 30. Rates are Preferred Platinum and are guaranteed to remain level for the 20-year period. Premiums are paid monthly via EFT (electronic funds transfer). Actual premiums can only be determined by a full application and underwriting process, including some medical testing at our expense. Depending on your exact age and health, your actual rates may be higher or lower. Standard form numbers ICC15 FGCLT01-01 in most states. Not all plans are available in all durations and at all ages. Some features may not be available in all states.
  • 2017 Amica Life Financial Peace of Mind Survey.
  • S. Department of Housing and Urban Development and U.S. Census Bureau, 2020.
  • How Much is a Mother Really Worth?, Salary.com, 2019.
  • What You Should Know About Buying Life Insurance, The American Council of Life Insurers, 2018.
  • 5 Reasons You Don’t Have the Right Life Insurance, Forbes, 2021.
  • Parents Are Paying for Their Millennial Kids Well After They Move Out Of The Basement, Business Insider, 2019.
  • What Happens When People Die with Debt, Debt.org, 2021.
  • Retention Is Top Benefits Objective, Employers Say, Society for Human Resource Management, 2017.
  • 2016 Life Insurance Ownership Study, LIMRA, 2016.
  • Pros and Cons of Group Life Insurance Through Work, NerdWallet, 2021.
  • Consumer Expenditure Survey, Bureau of Labor Statistics 2020 and 2021 LIMRA Insurance Barometer Study, 2021.

ALIC74221 Nov-22

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