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Life Insurance 101 Education

By Byron Udell | August 7, 2014

August is here, and while I only have one kid left in college, it seems all everyone wants to talk about this month is going back to school.  With that in mind, here’s a quick life insurance 101 education.  Additionally, below I dispel some myths and confirm some facts about the most important product mankind ever invented (that’s right—what else allows you to replace your income for pennies on the dollar AND protect your family?!  The wheel was a pretty valuable invention, so I’d listen to an argument for that).

Group life insurance through your employer is sufficient

Fiction. While the rates are low, the coverage you receive through work is rarely enough. Most companies will not provide enough to care for your family in the event you die. Plus, that coverage is not portable, meaning it’s gone if you no longer work for that organization.  Check with your employer about how much coverage you have, and then you’ll quickly realize how much you need more.

You only need life insurance if you’re married with children

Fiction. If you have anyone depending on you financially, you need life insurance.  In other words, if you died tomorrow, would anyone close to you be affected by the loss of your income?  A customized life insurance solution is available for whatever stage of life you’re in—single, married, retired, married with children, stay-at-home parent, etc.

If you’re a beneficiary and a death claim is filed, the money you receive is tax free

Fact. In almost all situations, the death benefit money you collect is free of federal income taxes.

You always have to take a medical exam if you want life insurance

Fiction. While you must take an exam for traditionally underwritten term and permanent policies, there is coverage you can obtain without having to take a medical exam.  Final expense whole life insurance is often available through a simplified process, and in some instances with guaranteed approval regardless of health factors.  Term and universal life coverage also comes in the form of simplified issue policies, which offer $250,000 in protection quickly without an exam.

Life insurance is too expensive

Fiction!  Here’s where people really get it wrong.  Life insurance is one of the few products that is significantly less expensive now than it was 20 years ago (it’s pretty hard to come up with others – cars cost more, electronics and technology cost more, houses and real estate are more expensive).  But the statistics really tell the story; a recent LIMRA/Life Happens study showed that consumers overestimate the cost of life insurance by nearly three-fold.  That means you probably think life insurance costs WAY MORE THAN IT DOES!  This one belongs in the FICTION section!

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