Posted on September 15, 2022

By: Mae Yang

Life insurance is a vital component in creating generational wealth, and it is just as important today as it has ever been. However, many people, particularly young people, are hesitant to purchase a policy due to misconceptions surrounding life insurance affordability and eligibility.

LIMRA's annual Life Happens study revealed that in 2022, 44% of families would face financial hardship within six months if a wage earner died unexpectedly. The right policy could protect these families from such hardship, and the industry needs to spread more awareness if financial security is to become a reality for everyone.

First Financial Security, Inc. participates in Life Insurance Awareness Month every September, aiming to promote the importance of life insurance to the public. This year's theme is "Myths About Life Insurance," focusing on dispelling common misconceptions that prevent people from seeking coverage.

Below are some common myths about life insurance, which are worth dispelling:

"Myths About Life Insurance"

• "Life insurance is only for adults of a certain age": This is not true. Anyone, regardless of age or health status, can find a policy that suits them.
• "I don't need life insurance because I have no children": Even if you have no children, you will still leave loved ones behind. Life insurance can cover your final expenses and burial costs, and save your beloved from debts like mortgages or student loans.
• "My beneficiaries will have to pay income taxes on the proceeds of my life insurance policy": This is not true. General life insurance benefits are income tax-free up to a certain threshold set by the Internal Revenue Service (IRS).
• "I can't convert my term life policy to a permanent or whole life policy": This is not true. Some term life insurance policies can actually be converted to permanent policies depending on the individual contract.
• "I no longer need life insurance because my children are adults": Even if your adult children can afford your final expenses, a policy still has many advantages — it can save them from potential estate taxes by the government or shield them from your outstanding debts. Legacies are built through life insurance.
• "I have so much in savings that I don't need life insurance": Most savings are for retirement, and life insurance can guarantee financial protection for your family once you're gone.
• "I cannot afford life insurance": Life insurance is more affordable than most people assume. A healthy 30-year-old can qualify for a $250,000 20-year level term policy for just $13 a month.
• "I draw no income; therefore, I don't need life insurance": Stay-at-home parents still provide services that would cost a significant amount of money to replace. From child care to cooking meals to daily transportation, life insurance can protect your loved ones from the burden of paying the costs you leave behind.
• "People with health issues cannot get life insurance": This is not true. Health is a factor for calculating premiums and coverage amounts, but it is not an excluding factor for anyone who needs life insurance.
• "I don't need life insurance for my student loans because they're forgiven upon death": Only federal student loan debt is certain to be forgiven upon death or total disability. If a private company holds your student loans, your family might be responsible for it if you die. Life insurance can protect your family from financial burdens no matter what.
• "I don't need life insurance": Everyone needs life insurance to protect their loved ones from undue financial burden during a difficult time. The right policy is out there for you.
• "Getting life insurance coverage is a long and complicated process": With automated underwriting, getting coverage is easier than ever. Almost 90% of life insurers offer or plan to offer this simplified process.
• There is no way to use my life insurance benefits while I'm still alive. 

When it comes to life insurance, many people believe that it is only useful after they have passed away. However, this couldn't be further from the truth. With advances in insurance products, there are now living benefits that can be utilized while you are still alive.

From covering housing needs to medical bills, living benefits can provide the necessary financial assistance to make life more comfortable during difficult times. Unfortunately, the misconception that life insurance is only useful after death still persists. Nevertheless, there is hope as more and more people are recognizing the importance of having adequate coverage.

In response to this growing need, insurance companies are expanding their offerings to provide innovative and comprehensive policies that cater to individual needs. But it's not just up to the insurers to dispel myths about life insurance. As individuals, it's our responsibility to educate ourselves and our loved ones about the benefits of life insurance.

While conversations about death and financial planning may be challenging, they are necessary to secure the future of our loved ones. With September being Life Insurance Awareness Month, there is no better time to explore your options and find the perfect policy to safeguard your legacy.

In conclusion, life insurance isn't just a tool to provide financial security after you have passed away. There are now living benefits that can be utilized while you are still alive, making it an essential component of a well-rounded financial plan. Don't let myths about life insurance hold you back from protecting yourself and your loved ones. Start the conversation today and find a policy that works for you.