Misconceptions VS Reality
Misconceptions VS Reality of life insurance
Many people have misconceptions or wrong opinions about life insurance.
Life insurance is simple:
it is designed to pay your beneficiaries a tax-free benefit in case of your death.
Life insurance is not meant to "benefit" your dependants but rather to allow you to continue to meet your financial obligations (mortgage, debt, feeding your family, etc) even after you have passed away.
However, many people leave their family at risk just because they are misinformed about, or don't understand, the facts of life insurance.
Below is a list of common misconceptions about life insurance
Misconception #1:
"It's too expensive"
Reality:
Most people overestimate the cost of life insurance by 3 times.
A 10-year term with a benefit of $500,000 for a 40-year-old female is $21.35/month. Hardly expensive.
Misconception #2:
"It probably won’t pay"
Reality:
Unlike other types of insurance, life insurance is black and white.
You’re either dead or you’re not. A company can't really argue that you're not really dead.
Misconception #3:
"Insurance companies make money by not paying claims"
Reality:
As an industry average, 98% - 99% of all claims are paid
without issues.
Most claims that are NOT paid (less than 2%) are usually because of a clearly stated exclusion, such as, suicide.
In the event that a claim in denied, 100% of the premiums are refunded.
Misconception #4:
"They will probably cancel my policy if I get sick"
Reality:
Life insurance contracts are
Non-cancelable
once they are approved. The insurance company cannot change your premiums or coverage, or cancel your policy for ANY reason.
Misconception #5:
"I don't think anything is gonna happen to me"
Reality:
Nobody thinks anything is going to happen to them. Nothing ever happens until it does.
Let's be honest. Who do you know that woke up one day and said "today something will happen to me"?
Misconception #6:
"They will probably increase my premiums every year"
Reality:
Life insurance is not auto or home insurance!
When you buy life insurance, your premiums are GUARANTEED to never change during the term of your policy (10, 20, 30 or 40 years)
When you buy life insurance, your premiums are GUARANTEED to never change during the term of your policy (10, 20, 30 or 40 years)
Misconception #7:
"I don’t trust insurance companies"
Reality:
Life insurance companies, especially in Canada, are heavily regulated by the government to ensure that they have enough assets, at all times, to pay any liabilities they have.
Because life insurance is very black and white, on average 98% to 99% of all claims are paid without issues.
Most claims that are NOT paid (less than 2%) are usually because of a clearly stated exclusion, such as, suicide.
Misconception #8:
"The company will probably take a long time to pay"
Reality:
NOT true. Most life insurance claims are paid within 4 to 7 days.
While companies want to make sure that they pay legitimate claims, it is NOT in their best interest to delay payments.
In fact, companies will begin to pay interest to your death benefit from day one until the money is received by your beneficiaries.
Delaying paying costs them money!
Misconception #9:
"I don’t need it"
Reality:
You’re right!
YOU don’t need life insurance,
your dependents do!
Remember, life insurance is meant to replace your income.
Misconception #10:
"I’m in perfect health"
Reality:
Excellent! That is why you should be buying life insurance now. The healthier you are, the better your rates will be.
Remember, life insurance is priced for people in good health.
The moment you develop health issues, buying life insurance becomes very expensive and difficult.
Misconception #11:
"I already have insurance through work"
Reality:
Great! You should take your existing coverage in consideration.
However, most group coverages pay a small amount ($50,000 or 1X or 2X your salary).
Proper life insurance coverage should cover the balance of your mortgage and debts as well as at least 10X your annual salary.
So, knowing this, is your group insurance enough?
Misconception #12:
"I already have accidental death insurance"
Reality:
That’s is great.
However, when most people think of premature death, they think of an accident. The truth is that only 4% of deaths in Canada are caused by accidents. In reality, disease and medical malpractice still account for almost 90% of all deaths.
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