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The Facts of Life (Insurance)

January 24, 2019

The Facts of Life (Insurance)

As conversations go, discussing life insurance is a tough talk to have on a couple of fronts. First, no one really wants to talk about their own death or the death of a loved one, and secondly, there are a lot of myths about life insurance that make talking about it difficult to navigate. On this latter front, InsuranceHotline.com can help by debunking some of the more common life insurance misconceptions.

Myth: Life insurance is unnecessary.

For most people, this is not true. If anyone relies on you financially, like a spouse or child, or if you have debts like a mortgage, then chances are life insurance is a good idea. By having the financial safety net of a life insurance policy, you can ensure that your funeral arrangements are covered, debts are paid off, and your family’s day-to-day (and future) needs are taken care at a time that is sure to be difficult.

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

The fact is you’re not insuring for what’s likely to happen but instead, for the worst-case scenario. That’s why life insurance is generally inexpensive for young, healthy people. Additionally, it could be argued, that being young and healthy is a good reason to take out a policy now. Life insurance rates will likely be the cheapest they’ll ever be, and buying now lets you lock in premiums for years (if not decades) to come.

Myth: I have life insurance through my employer and it’s enough.

Your group life insurance policy through work may not be enough to adequately take care of everything you’d like it to cover. Many employer-paid policies only offer two or three times your salary in protection; however, industry insiders will typically suggest that you have at least five times this amount. Another factor to consider, is what happens when you leave your place of employment, will your coverage follow you?

It’s a fact: According to the Canadian Life and Health Insurance Association of Canada, households with life insurance are covered on average for $417,000 worth of protection, and for individuals the average is $212,000. Do you have enough?

Myth: Mortgage life insurance is all I need.

Mortgage life insurance pays off your mortgage, but that’s all it pays off. What about the rest of your debts, expenses, and commitments to your family? With a term life insurance policy, for example, the money can be used for anything your beneficiary sees fit to spend it on, including: funeral expenses, paying down a mortgage, minimizing car loan and credit card debts, or to offset the loss of your income into the household’s finances.

Myth: A stay-at-home parent doesn’t need to have their own life insurance policy.

There may be no paycheque or income to replace, but the financial contribution of a stay-at-home parent to the household’s coffers is significant when you consider all of the expenses that are being saved: childcare, housekeeping, and tutoring to name just a few. Life insurance could help cover the costs that you would have to pay, in the absence of a stay-at-home parent.

Myth: The mortgage is paid and the kids are self-sufficient so life insurance is pointless.

The children may be adults with a family of their own and you now own your house outright, but life insurance can protect your spouse at a time in their life when they’re looking into their retirement years. The payout can also help pay the considerable fees that typically come with the cost of death, leaving your estate wholly intact.

Myth: Life insurance is expensive for smokers.

Smokers will pay more for coverage than a non-smoker but its cost is probably more affordable than you realize. In fact, you likely pay more for your cigarettes each year than you would for your life insurance policy.

Quotes for $250,000 10-year term life insurance: Smoker
Age Gender Premium
30 Female $190 yearly or $17 a month
30 Male $289 yearly or $26 monthly
35 Female $240 yearly or $22 monthly
35 Male $320 yearly or $29 monthly
40 Female $345 yearly or $31 monthly
40 Male $455 yearly or $41 monthly
45 Female $500 yearly or $45 monthly
45 Male $740 yearly or $67 monthly
Term 10 life insurance quotes obtained January 2019. Monthly premiums factor in the fee insurers typically charge for administering monthly payments.

Myth: Ex-smokers pay the same premiums as smokers.

If you’ve butted out for good but have put off getting insurance because you thought you’d have to pay smoker rates, we’ve got good news for you! Many life insurance companies consider you a non-smoker once it has been a year since your last cigarette; so, if you’ve got a smoke-free year under your belt you can get the best life insurance rates possible.

Myth: If I buy a 10-year, 20-year or 30-year term policy, I’m locked in to keeping my policy (and making premiums) for all that time. There’s no out clause.

False. Term lengths are simply a guarantee from the insurer that your premiums will not change over the course of your policy’s term. If for some reason, you want to cancel your policy, you can. However, in general it’s best to avoid cancelling your policy because when you’re ready to get coverage again, your rates will be higher since you’ll be older than when you got your original policy.

Myth: Life insurance is expensive.

If in the past you’ve thought life insurance to be too expensive it could be because of the type of coverage you were looking at, like whole or universal life insurance. These types of policies often include an investment component built into the policy which makes them initially more expensive. Term life insurance, on the other hand, does not have a savings or investment component, and it is generally the most affordable of all the life insurance products. As a result, term life insurance is very popular.

You insure your car. You insure your house. Why wouldn’t you insure your biggest asset?

Chances are you have auto insurance; you also likely have home insurance. Isn’t it time you insure your family’s biggest asset? Compare term life insurance quotes today.

  • https://lifeinsurancementors.com/ Roy

    The pointers will mostly break the myths that most people are misled to believe. But it kind of falls short of truth that smoking does not affect rates in a big way. We have compared multiple companies and seen that smokers (company-specifically) pay more than 500% than non-smokers.

  • BuckDSystem

    Notice that all the examples they were giving you were for 10 year terms? Notice that they didn’t tell you how much your rates will go up after the term expires?
    Want to know what the statistics are for a term life policy to actually pay out? 1 in 50.
    The statistical odds for winning at a casino on a single number roulette spin? 1 in 37.
    Casinos occasionally go bankrupt. Anybody know the last time a Canadian life insurance company went bankrupt?

  • BuckDSystem

    What do you mean by “company”? As for 500% , that is not true. 50% higher is more realistic as to what Canadian life insurance typically might surcharge for smokers.

  • BuckDSystem

    The examples for smokers were on a 10 year term. Smokers don’t die that young, so those rates show that smokers don’t pay much more. This would not be the case for 30 year terms of whole life permanent life.
    A 30 year old male smoker. How many smokers die before 40? Those stats are cherry picked to show the best possible case scenario.

  • https://lifeinsurancementors.com/ Roy

    Thanks, BuckDSystem for following me. I am talking from U.S. context. And, I am going to soon publish the 500% thing in my blog Life Insurance Mentors. Hopefully, I will let you know.

  • http://www.insurancealliance.ca/ James Roi

    Nice Information!!!
    This is very favorable list. Thank you for including your awesome experiences that you have shared.Thanks for enriching us with your knowledge.