Life insurance can be a complicated product, Akron Ohio. As simple as term life policies are many elements must be considered carefully in order to arrive at the right type and amount. It is the technical aspects of life insurance that are less difficult for most people to understand. It is the calculating on how much life insurance coverage they need and why that causes them to wonder.
What you will read will briefly take a look the some of the most common myths pertaining to life insurance and the truths that they sometimes distort.
Myth No.1: I'm single and don't have any dependents, therefore I don't need any coverage. Even a single person needs at least enough life insurance to cover the costs of personal debts, medical and funeral bills. If you are uninsured, you may leave a legacy of unpaid expenses for your family or executor to deal with. Plus, this can be a good way for low-income singles to leave a legacy to a favorite charity or other cause.
Second Myth: I only need an amount of life insurance coverage equal to twice the amount of my annual salary. That depends. You need an amount of life insurance equal to the amount that is needed based on your families needs. In addition to obvious bills and expenses, you may need to pay off larger debts such as the mortgage and provide an income for a number of years, in Akron Ohio. A cash flow analysis is usually helpful in order to determine the actual amount of insurance that must be bought - the days of simply computing life coverage based only on one's income-earning ability is long gone.
Third Myth: I have life insurance through my employer that is all I need. This could be. For a single person and few bills, employer-provided term coverage is probably enough. However, if you have a family and kids your coverage through your employer, will not be enough. Plus, in most cases, that employer plan does not go with you when you leave that job.
Fourth Myth: I can deduct my premiums from my taxes in Akron Ohio. This is not true, in most cases. The personal life insurance premiums are never deductible unless the policyholder is self-employed and the coverage is used to insure his business. Then the premiums are deductible on the Schedule C of the Form 1040. With that said the death benefit could be taxed. So be careful.
Fifth Myth: Only if you are the one making the money, do you need life insurance. This sounds like pure nonsense. The deceased homemakers responsibilities can cost higher than you think, the costs for cleaning and daycare could run over one thousand dollars per month.
Sixth Myth: I am always better off buying term and investing the difference. Not always. The cost of term life coverage can become very expensive in the later years, so those who know for certain that they must have coverage until death, should consider permanent coverage. The overall premium outlay for a more expensive permanent policy may be less than the rising premiums that could last for years longer with a less expensive term policy.
There is also the chance of being uninsurable, which could be disastrous for those who may have estate tax issues and is looking to use life insurance to pay them. To eliminate this risk with permanent coverage, it can be paid up after certain amount of premiums have been paid and then remains in force the rest of your life.
Myth No.7: Variable universal life policies are always superior to straight universal life policies. Many universal policies pay competitive interest rates, and variable universal life (VUL) policies contain several layers of fees relating to both the insurance and securities elements present in the policy. Therefore, if the variable sub accounts within the policy do not perform well; the variable policyholder may well see a lower cash value compared to a non variable universal life policy.
Sub par market performance can also generate substantial cash calls inside variable policies that require additional premiums due in order to keep the life insurance portion of the policy in force.
Eighth Myth: Only the one making the money needs life insurance coverage. This is pure nonsense. The cost to replace the responsibilities that were provided by a deceased homemaker can be higher than you think; the costs for cleaning and daycare are higher than you think.
Ninth Myth: You should always add the return of premium (ROP) benefit in Akron Ohio. There are several different levels of ROP riders available for policies that offer this feature. Some financial advisors will tell you that this rider is not cost-effective and should be avoided. Whether you include this rider will depend on your risk tolerance and other possible investment objectives.
A cash flow analysis will reveal whether you could come out ahead by investing the additional premium amount, of the rider elsewhere, instead of putting it into the policy. Riders are available to provide additional benefits that help you customize your policy.
Myth No.10: I'm better off investing my money than buying life insurance of any kind. Complete nonsense. Until you reach the breakeven point of asset accumulation, you need life coverage of some sort, barring the exception discussed in Myth No.5. Once you amass $1 million of liquid assets, you can consider whether to discontinue, or at least reduce, your million-dollar policy. But you take a big chance when you depend solely on your investments, especially if you have dependents. If you die without coverage for them, there may be no other means of provision after the depletion of your current assets.
In conclusion, these are just some of the more prevalent misunderstandings concerning life insurance that the public faces today. The key concept to understand is that you shouldn't leave life insurance out of your budget unless you have enough assets to cover expenses after your death.
About the Author:
For more see our videos, or see our faq articles on How To Meet Your Loved Ones Needs, or obtain a quote from an agent.
Get all the information and photos:: http://coringa.info/finance/life-insurance-myths
0 comments:
Post a Comment