Professional Insurance Blog

Myth #1

“I have enough life insurance at work.”

Group life insurance may not offer enough for your family to live on in the event of your death. Employer sponsored insurance will last only as long as you stay there and it ends in the event of a layoff or retirement. HR departments often do not inform a departing employee that their coverage can be converted to a more expensive plan. Look at your total death benefit, imagine your family investing that amount at 8% and living off the interest. Can they can live on that income?

Myth # 2

“Only the breadwinner needs life insurance.”

If you investigate the cost of child care, accounting, housekeeping and other home functions that an unsalaried spouse does everyday, then you may find that the cost of replacing the services of a deceased nonworking spouse can be greater than replacing the breadwinner’s income. It is imperative that life insurance cover the lives of both spouses to insure a proper income for the survivor and family.

Myth #3

“Whole life insurance is the only way to go.”

The most important thing about life insurance is that it pays a substantial amount of money (the death benefit) to the one who needs it the most (the beneficiary). That is the best that life insurance should do and that is why the concept was created. Term life insurance gives you the same coverage for the least amount of money. In many cases, it is wise to buy term and invest in an annuity or mutual fund. But in many cases, insurance may be needed for longer than a term policy will allow. In the State of New York, term insurance can only stay in force until age 80. This is not sufficient for debts that are carried beyond age 80 and term plans become prohibitively expensive in the later years.

Myth # 4

“I won’t need life insurance after the kids are out of the house”.

Many parents may carry enough insurance to provide for education, income and debt needs such as a mortgage when the children are in the house and going to school and college. But when the kids leave the “nest”, a surviving spouse still needs coverage for that unpaid mortgage and other debts. While a term plan can last as long as 30 years, a permanent plan would cover you for as long as you live so a deceased spouse can have a mortgage balance paid off even after age 80.

Myth #5

“You should only buy 5 times your annual salary in life insurance.”

If it were that easy a child could determine your life insurance needs. A professional agent will ask you questions about current debt balances including mortgages, credit cards and other financing along with the need for an emergency fund, retirement for a non working spouse, college funding and much more. The answers will bring you to the correct amount of affordable insurance that you should be carrying.

Myth # 6

“Life insurance is a hassle to get and too expensive.”

First of all life insurance has never been less expensive than it is today. Mortality tables, from which insurance companies determine their cost of life insurance to the customer, show that people are living longer than ever. This is due to better health care, diets, exercise, more advanced surgeries, less smoking and abuse of alcohol. This means that the chances of premature death are less and therefore the cost for insuring an individual life is also less.

Second, the process of underwriting has been streamlined so that in most cases the policy can be written and delivered in a matter of 2-3 weeks.

Myth # 7

“The Internet offers the best deals.”

The internet certainly makes it easier to shop for anything including life insurance but the face to face, personal services of an informed, independent and knowledgeable insurance agent are very important to your making a final decision. Rates on the internet are often offered for classifications that very few people qualify for. Issues such as ownership and beneficiary changes, rider options and what they offer and estate planning are best accessed through an experienced agent.

Alan S. Fernandez is president of Foundation Financial Services with a BBA in Finance and Economics, has studied under the Life Underwriters Training Council and Certified Financial Planner program and with 15 years in the insurance industry is a well known problem solver among businesses and individuals alike. He can be contacted at afern109@optonline.net or visit the FFS website at www.foundationfinancialservicesny.com