Shopping for life insurance can feel overwhelming, especially if you don’t have the facts. You may have heard that it’s too expensive or only healthy people can qualify for coverage, but the truth may surprise you.
We break down six common life insurance myths so you can better understand your options and get coverage that’s right for you.
Myth 1: Insurers won’t pay out if you’ve had a COVID-19 vaccine
The COVID-19 vaccine does not impact an insurer’s decision to pay out claims, as confirmed by the American Council of Life Insurers in March 2021. In addition, the vaccine is typically not used to determine your eligibility for coverage. In fact, it may open up coverage for those with underlying health conditions, as the vaccine reduces the risk of dying from COVID-19.
Concerns over whether life insurance covers deaths from COVID-19 are also largely unfounded. In most cases, life insurance policies cover infectious diseases, such as COVID-19.
Myth 2: Life insurance is expensive
One of the biggest myths about life insurance is that it comes with a hefty price tag. Over half of Americans overestimate the cost of term life insurance by three times its actual cost, according to the 2020 Insurance Barometer Study from marketing and research firm LIMRA and life insurance-focused nonprofit Life Happens.
In reality, premiums can be relatively low, especially for younger generations. “Their costs are going to be minimal, something very similar to maybe their Netflix subscription,” says Faisa Stafford, president and CEO of Life Happens.
Use online calculators, work with a fee-only financial advisor, or speak to a licensed agent to get accurate life insurance quotes.
Myth 3: You don’t need life insurance if you’re young and healthy
Although your mortality may not be top of mind when you’re young, getting coverage early can help you lock in low rates. This can be useful, as the price of a policy can go up as you age.
The “cost of insurance on younger, healthy individuals is super inexpensive,” says Ebony Ruffin, founder of Ruffin Consulting Services, a financial planning firm with a focus on life insurance. It’s perhaps not surprising that 40% of people wished they’d purchased life insurance when they were younger, according to the 2020 Insurance Barometer Study.
Your future insurability is another factor to consider. If you develop a health condition before you buy life insurance, your access to affordable coverage may be restricted. Features like guaranteed insurability riders will allow you to purchase more coverage in the future without a medical exam.
Life insurance can also help cover funeral costs. While this may not seem pressing when you’re young, events like the pandemic highlight how unpredictable life can be.
Myth 4: If you have health issues, you can’t get it
Although insurers typically use your health to calculate rates and coverage amounts, it doesn't mean you can’t get life insurance with a pre-existing condition. In fact, some policies are built specifically for certain health conditions like diabetes or cancer, Stafford says.
You can skip the medical exam altogether with simplified issue life insurance. These types of policies require only a short health questionnaire. If you don’t want your medical history to be a factor at all, consider guaranteed issue life insurance. Acceptance is guaranteed regardless of your health, as long as you’re within the eligible age range, typically 40 to 85.
It’s important to consult a financial advisor or life insurance agent to make sure you’re applying for the right type of policy. If you apply for coverage with a known illness and are declined, it can act as a red mark on your file, Ruffin says. This can put you in a different risk class, which may lead to higher premiums in the future.
Myth 5: If you’re single and have no dependents, you don’t need it
Life insurance isn’t just for breadwinners. For example, if a parent or guardian co-signed on your student loan, a new car or your first mortgage, life insurance can help protect the co-signer from taking on the debt if you die, Stafford says.
You can also leave the death benefit to someone who doesn't rely on you financially, like a niece or nephew, Stafford says. Similarly, if you support a charity or nonprofit, you can assign some or all of the death benefit to the organization.
Life insurance can also offer a financial safety net to small-business owners. If “you have a partner or you have employees that depend on you, you can buy life insurance to protect that business,” Stafford says.
Myth 6: Life insurance through your employer is sufficient
Group life insurance through an employer is typically one or two times your salary, which may not be enough to support your loved ones. “You probably need at least 10 times your salary,” Stafford says.
Another thing to consider is portability. Free policies through work are often tied to employment, so if you leave your job, you may lose your coverage. Buying individual life insurance means you’re covered regardless of where you work.
When speaking with a licensed agent or financial advisor, ask them to walk you through each type of life insurance. One type of life insurance isn’t necessarily better than another; it’s about what’s right for you.