There are a lot of myths and misconceptions when it comes to life insurance. It is always best not to assume certain myths as facts. Mistakes made when buying life insurance have long-lasting consequences, which may not be fixed.
You need to choose the life insurance that is right for you. Thus, it is best to avoid these five common myths:
Myth #1: You should buy seven times your annual earnings.
The rule of thumb states that you should have so many times your annual income is not necessarily true.
Most people have less coverage than they need because of these rules of thumb. To calculate the amount you actually need, estimate how much your dependants will need to maintain their lifestyle. Include the costs of childcare, education and emergencies. Add up all other sources of income and subtract it from the expenses. Then, add the net debts that need to be paid up to obtain the total coverage required. To make sure that you don’t miss out a calculation, it is best to use a licensed insurance advisor in Calgary, Alberta.
Myth #2: Agents don’t give you the best deals, the internet does.
The internet is a great place to shop and research life insurance. However, it does not always bring a cheap price for no reason. Frequently, the premiums posted on internet sites are misleading, since they often quote the rate for the healthiest individuals. They may also give you an initial rate that will increase significantly in a year. Moreover, you also need to compare the policy features.
Myth #3: You should always name your estate beneficiary
If you do, the proceeds will go through the lengthier probate process in Alberta. This can take several months before payments can be made to your heirs. Moreover, the proceeds will also increase the value of your estate. This could mean your family might have to pay estate taxes.
Myth #4: If you are in poor health, you can’t be uninsured
This simply is not true. Many companies out there specialize in coverage to those who have or have recovered from a serious illness. Since this coverage may be expensive, there are other insurance options also available.
Moreover, if your insurance application was declined once, it does not mean it would be declined again. Shop around, one company might charge you an additional risk premium, while another will charge you a standard rate. Thus, it depends on the individual insurance company as well as your health status.
Myth #5: Life insurance is more important than disability coverage
Most people recognize life insurance as an important part of their financial plan, but often overlook the use of disability insurance. The fact is that you are 50% more likely to be disabled than you are to die when you are under the age of 50. Hence, disability insurance should be also considered as part of a comprehensive insurance plan.