Life insurance is not something that's "good to have." Rather, it's a must-have for everyone — especially those who have loved ones who depend on them. This is because, at the most fundamental level, life insurance guarantees financial security for your family in the event of your demise and similar untoward events. This, in turn, offers you peace of mind — knowing that your loved ones will be okay and well-taken care of in your absence.
But beyond the many well-known benefits of life insurance, what do you really know about it? Moreover, it's fairly common for the nitty-gritty of life insurance to be misconstrued and misinterpreted, which is why there are so many misconceptions about it. It's wise, therefore, to really get to know this valuable financial tool — as only then will you and your family truly benefit from it.
Yes, There's More Than One Type Of Life Insurance
First of all, "life insurance" is a broad term that encompasses several sub-types. Not only that, but the types of life insurance are actually not created equal, And, depending on your specific needs and circumstances, you will likely find that some types are better than others.
For example, you've likely heard of term life insurance. This type is set to last for a certain number of years. If you do not die before the end of the term, it ends without a payout. Whole and universal life insurance, on the other hand, are more permanent and often include some cash value, which increases over time. Beyond these primary life insurance types, there are even more policy variants. So it's definitely important to do your research and know all your options right off the bat.
No, You Don't Always Need A Medical Exam To Get Life Insurance
One of the most prevalent misconceptions about life insurance is the need for a medical exam during the application process. The fact is, many policies don't require medical exams. These types include simplified issue, medically underwritten, or guaranteed issue variants. It all boils down to the underwriting process — which is why, again, it's a good idea to comparison-shop. That way, you ultimately choose the right policy for you and for your budget, as well know what to expect during the process.
No, It Doesn't Have To Be Expensive
The cost of life insurance is another big concern for most people, for obvious reasons. However, insurance premiums are generally not as expensive as most people think. In fact, it's been said that around 80 percent of people overestimate its cost.
Of course, the cost of your premiums will ultimately depend on variables like the type of insurance, coverage, age, medical history, lifestyle, etc. But as a general rule of thumb, getting insurance at a young age and while you're in the peak of health will keep your premiums on the low side. On the other hand, being a smoker, engaging in dangerous activities, and other such risky criteria will drive up the cost.
Yes, You Need To Read The Fine Print
Lastly, it's only wise to really know the finer details of your life insurance policy as, more often than not, there are important caveats. For instance, it's easy to assume that your beneficiaries will be paid their dues in the event of your death. But while this is generally true, some policies actually impose conditions on payouts depending on a variety of factors. It goes without saying that by knowing such exclusions right off the bat, you get to avoid unpleasant surprises.
Suffice it to say, life insurance is a valuable financial instrument that you and your family will benefit from in more ways than one. So, wherever you are in your life right now, know your options and don't procrastinate. Much of your family and loved ones' financial future depends on it.
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