3 Common Myths About Life Insurance

Don't fall victim to mistakes that make getting the right coverage impossible.

Many people are confused about life insurance and the exact role this type of protection should play in financial planning. That's a big problem, because it can be one of the most crucial types of insurance coverage -- and it's best to purchase it ASAP in most cases.

For those who may not be aware of the realities of life insurance protection, it's important to learn the truth about three common myths. Here's what they are.

1. You only need it if you have income

One of the single most persistent myths about life insurance is that it's necessary to buy only if the covered person has income. In fact, many experts recommend choosing how much life insurance to buy solely based on a multiple of income. For example, it's common advice to buy a policy that replaces 10 to 12 times annual earnings.

The reality, however, is that there are plenty of people who do not earn income but who provide valuable services to loved ones. This can include, for example, a parent who is taking care of young or disabled children. Or it could include someone that is providing hands-on care for aging parents.

In these situations, the services being provided have tremendous value. Without those services, professional care could become necessary that costs hundreds of thousands of dollars per year. Without life insurance in place to pick up the tab, surviving loved ones left behind could be in dire straits.

As a result, it's important not to purchase life insurance solely based on earnings, but rather based on who is depending on the covered person. This should be the determining factor both in assessing whether a policy is needed and how much coverage is required.

2. It's expensive to buy

Another major misconception is that life insurance is expensive. Those who buy into this myth may opt not to even look into purchasing a policy since they may assume doing so would be out of their price range.

The reality, however, is that most people only need term life insurance which is a policy in effect for a limited time such as 30 years. Term life policies can be extremely affordable, often costing around $30 per month -- give or take a bit -- especially when purchased by someone who is relatively young and in good health.

The sooner life insurance coverage is purchased, the more affordable it will be. Going without it could be a huge and devastating costly error, so it's best to get some premium quotes and try to find an affordable policy ASAP.

3. Employer-provided coverage is enough

Finally, many people who get life insurance through an employer incorrectly believe this coverage is sufficient. It often isn't, either because the policy limits are too low or because the coverage could end when the job does -- or both.

It's important to make sure the right level of protection is in place, with a policy that can be kept for as long as needed even after departing from a job.

By learning the truth about these three myths, consumers can make the right choices about buying insurance protection that could very well stave off financial disaster in the event loved ones are left behind after an untimely death.