Myth 1: Life insurance offered by your employer is sufficient.
Life insurance from your employer is a nice perk, but it’s not your only option.
Darren Devine is President of Devine & Associates Financial Services in Guelph, Ontario. Here is his opinion: “The problem with an insurance plan at work is that it does not belong to you. The employer is the owner. He is free to modify it at any time.
Due to a change in your employer’s plan, you could find yourself with insufficient coverage when you need it most. You can convert your group life insurance to individual life insurance. But, the options and advantages are sometimes fewer than with insurance taken out personally. Your new contract may therefore not offer you the desired protection. By choosing your life insurance, you have more control and stability. You’ll be able to select security you can count on when you need it.
Myth 2: It costs too much.
Your monthly or annual premium – what your insurance costs you – can be a burden. Still, buying permanent life insurance as soon as possible is the best way to get a reasonable price. “Age is the main element on which the price of life insurance is based, underlines Mr Devine. The younger you are, the more affordable it is.”
If your budget is tight, ask your broker about term life insurance. This type of insurance offers a short-term solution that protects you for a fixed period (5, 10, 20 years or more). “If you’re young and healthy, you could pay as little as $30 a month,” Devine says. It’s an excellent way to ensure your financial security at little cost.”
Term life insurance seems less expensive at first. But we must not forget that the rate is not fixed for life. This rate increases with each renewal, which is why most term insurance contracts come with a right to convert to permanent life insurance, which protects life, usually at a fixed rate.
Is term life insurance right for you?
Myth 3: Life insurance is only for paying funeral expenses.
When you purchase life insurance, your premiums are primarily used to build a tax-free death benefit for your family or beneficiaries. The death benefit is the amount paid to your heirs after your death. People sometimes consider it a way to cover the cost of their funeral. It is indeed possible. But you can also evaluate other financial needs of your family. Ask yourself these questions: What expenses are you covering for your family right now? Would it be able to cover these expenses in the event of your death?
“Your family may depend on you for various day-to-day expenses, such as mortgage payments or school fees,” suggests Devine. By having the right life insurance, you will be sure to leave them enough money to cover these expenses and pay off any outstanding debt.
How to choose the right type of life insurance
Myth 4: You need the same life insurance coverage as your spouse.
According to Devine, the choice of life insurance depends on your level of debt and your income. Unless your spouse’s income is the same as yours, you probably won’t need the same coverage. By having two personalized contracts, each one benefits from the level of protection that suits him. You’ll avoid “over-protection” (paying for too much coverage for your needs).
Try our life insurance calculator to get an idea of how much protection you might need.
If you need help understanding the different options available to you, talk to an advisor in your area.
