Life insurance is a contract between a policyholder and an insurer. The contract ensures that the named beneficiaries are paid money by the insurer when the policyholder passes away or is unable to work for pre-determined reasons. The policy helps to provide financial support to your loved ones during times of uncertainty.
Unfortunately, few people understand how life policies work which explains why there exists a lot of misconceptions about life insurance.
In this article, we seek to enlighten you on life insurance facts you should know to clear any misconstructions you have about these policies. Let’s dive in!
Fact #1: The Price of Your Premiums Depends on Many Factors
The cost of life insurance premiums depends on factors such as:
Health and lifestyle
Smoking, obesity, alcohol consumption, and a poor medical history increase the cost of premiums.
Age
The younger you are, the cheaper the insurance premiums.
Policy type
Whole of Life policies are more expensive than term-based policies, which pay out if you die during a set time.
Occupation
A risky job like construction, security, or emergency services costs more than if you were working a regular job.
Fact #2: You Don’t Need Annual Health Checks
The myth that an annual health check and a full medical exam are required before signing up for a policy is false. Usually, you will be asked questions concerning your lifestyle, alcohol intake, smoking habits, pre-existing medical conditions, and your family’s medical history.
A physical exam is required if you have a pre-existing condition or want a large insurance cover though.
Fact #3: You Need Life insurance Even When Healthy
Life is unpredictable, and a calamity can strike unexpectedly at any moment. Even if you are healthy, an accident may occur and leave you unable to provide for your dependents.
So, even if you are fit, life insurance aims to cover your dependents should anything happen to you.
Fact #4: You Can Name Secondary Beneficiaries
When you take out life insurance, it’s a good idea to name a secondary beneficiary. What happens if your primary beneficiary passes away before you and you don’t name a secondary beneficiary?
Your policy will be paid out, though it will go to your estate, and it will take a long time for your family to access the money. Besides, retirement accounts will hold your assets in probate until the court decides how to distribute the money.
Fact #5: Life Insurance Through Employers Is Never Sufficient
Some employers offer a form of life insurance they call a “death in service” benefit. The payout to your beneficiary will be tax-free if you pass away while working for the company.
While this payout may be generous but oftentimes insufficient to offer enough coverage for your beneficiaries? This is why taking out personal life insurance is recommended.
Also, if you stop working for your current employer, your life insurance ends, and your new employer may not offer “death in service” benefits.
Fact #6: Some Plans Offer Additional Benefits
Plenty of insurance companies offer policyholders benefits to enjoy while still alive. Such benefits include:
- Cinema tickets
- Gym memberships
- Sportswear discounts
You can also take out a policy that comes with benefits like taking care of funeral expenses. Your family will receive an extra amount to give you a decent send-off when the inevitable happens.
Fact #7: Some Cases Are Not Covered
If you intentionally give false information, that could mean no payout for your beneficiaries. Usually, life insurance covers death caused by illness, accident, and other natural causes. But if for example your beneficiaries murder you and it’s proved, they will not receive any payout.
Risky hobbies like scuba diving and bungee jumping may also be excluded from coverage if the insurer feels the risk of you passing away is high.
Fact #8: You Can Change Your Life Insurance
When you first took out your insurance, you might have been alone. But now there’s a spouse, a child, or a bigger mortgage in the picture. You are allowed to review your insurance cover from time to time.
If you don’t want to change your insurance provider, you can switch from Whole of Life to term life policy or vice versa. Doing so will save you from paying surrender fees or doing extra medical check-ups.
Fact #9 With Life Insurance Your Dependents Can Maintain Their Current Lifestyle If You Pass Away
You can answer “yes” to that question if you already took out a life insurance plan. That means if anything happened to you today, your dependents would be financially secure.
Despite people’s misconceptions about life insurance, it is not always expensive, you don’t need to do annual check-ups, and some plans may offer you benefits like paying for part of your funeral expenses.
So what are you waiting for? Get covered today and secure the financial future of your loved ones.