Dispelling five life insurance myths
President of US Life Insurance, AIG Life & Retirement
Follow Tim Heslin on LinkedIn
Life insurance is a key cornerstone of a holistic financial plan. Yet, according to research from AIG Life & Retirement, Americans have significant knowledge gaps and misconceptions about life insurance. Perhaps even more concerning is that nearly half of Americans don’t have coverage¹, and many of those with coverage may not have enough to support their families, with an average gap of $200,000².
This “protection gap,” which can leave families unprotected should the unexpected happen, is largely attributable to five common life insurance myths:
1. Coverage is too expensive: Premiums vary greatly depending on the type of policy, length of coverage and benefit level. But with the help of a financial professional, individuals can sort through the options to find an affordable policy that’s right for them.
2. Policy terms are too rigid: Individuals can choose from a wide range of options to meet their needs based on their specific financial situation. For example, term policies enable clients to choose the desired time horizon and amount of coverage. Other policy types, such as Universal Life, allow the buyer to determine the timing and amount of premiums.
3. Complicated application and approval process: Applying for life insurance is much easier and more straightforward than it used to be. Digital automation has simplified and shortened the process; applications can be submitted online, and some do not require a medical exam. And, enhancements continue to be made, focused on speeding up underwriting and approvals.
4. I’m too young: There is no single “right age” to purchase life insurance. What matters is the individual’s personal goals and the best way to ensure that their loved ones are protected financially. Consider also that pricing increases with age, making it more affordable to start earlier.
5. The value of life insurance is limited to the death benefit: Many permanent life policies, including Indexed Universal Life, allow for cash value accumulation that can be used for various purposes – such as paying for college, a wedding or an emergency loan. Some policies can also be used as a tax-advantaged retirement savings vehicle or to fund future medical expenses, including critical or chronic illnesses.
COVID-19 has dramatically reminded us of one of life’s paradoxes: we can count on the unexpected to happen. By including life insurance as part of a holistic financial plan, individuals and families can be prepared for the unexpected, today and in the future.