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3 Life Insurance Myths That Could Hurt Young Families

When you’re just starting out, it often seems that a dollar never stretches far enough. And with new commitments, such as buying your first home or having children, comes the responsibility to make sure your loved ones will be provided for financially, no matter what life may bring.

If you were to die unexpectedly, life insurance is there to make sure your loved ones can maintain their standard of living, stay in your home, send your kids to the same schools and keep their plans for the future on track. It also gives the grieving spouse or partner time to make decisions, or in some cases find work outside the home, without worrying about finances.

But common misconceptions often prevent young families from purchasing the life insurance they need.

Myth 1: I only need life insurance if I’m the primary breadwinner in my family. Whether you bring home the largest paycheck in your household or a smaller one, your family relies on your income to maintain its quality of life, and it would be missed if something were to happen to you. Even if you don’t work outside of the home, having life insurance is a smart choice. Stay-at-home parents perform valuable services such as childcare, cooking, housecleaning and household management, which can be costly to replace for a surviving spouse or partner.

Stay-at-home parents perform valuable services such as childcare, cooking, housecleaning and household management, which can be costly to replace for a surviving spouse or partner.

Myth 2: If I buy a term life insurance policy and find that I still need protection when the term ends, I can always renew the policy. Term policies are quite popular with many young families, and for good reason: They typically offer the greatest coverage for the lowest cost. Term insurance provides protection for a specific period of time (the “term”), and can be ideal for people who feel they have financial needs to cover that will disappear over time, such as a mortgage or a child’s education.

However, many families realize that even after the kids are grown and the mortgage is paid off, their need for insurance continues—to provide income for a surviving spouse, eliminate debts, pay taxes, etc. Because life insurance premiums increase with age, renewing your policy when the term expires can be very expensive. Moreover, poor health may make renewal impossible.

Myth 3: I only need term life insurance. Term life insurance makes sense for many young families because their need for coverage is great and their budgets are often limited. But that doesn’t mean it’s the only type of insurance you should consider.

Permanent life insurance policies provide a death benefit as well as other unique features such as lifelong protection and the ability to accumulate cash values on a tax-deferred basis, similar to assets in most retirement-savings plans. You can access the cash values for important uses like a child’s education or a business opportunity. (Keep in mind, however, that withdrawing or borrowing funds from your policy will reduce its cash value and death benefit if not repaid.)

If these features appeal to you, it might make sense to buy a large face amount term policy, giving you the death benefit protection you need, and combine it with a smaller permanent policy. When your budget permits, you can gradually increase your permanent insurance coverage. If you’re not sure which would be better for you, you can answer a few easy questions on our Product Selector.

And remember, insurance agents and advisors are there to help you. They can step you through your life insurance needs and solutions at no cost or obligation. If you don’t have an agent, you can use our Agent Locator here.

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Marvin H. Feldman, CLU, ChFC, RFC, President and CEO of Life Happens

by Marvin H. Feldman

Marvin H. Feldman, CLU, ChFC, RFC, is president of the Feldman Financial Group in Palm Harbor, Fla., and president and CEO of Life Happens. He is a 41-year Million Dollar Round Table member and was the 2002 president. He is a 33-year member of the MDRT Top of the Table and a past Top of the Table chairman. He also is the recipient of the 2011 John Newton Russell award, the highest honor bestowed on an individual by the insurance industry.

    1. According to LIMRA, only 2% of term policies become claims, and only 2% of all term converts to permanent policies. Why? Because the policies have lapsed or expired before they run their full term period, and, according to industry statistics, usually only the sick convert. This is not the case in my practice as term was my inventory of future business written to protect insurability and conserve cash flow until it could be converted to protect against a permanent problem.
      Marv Feldman

      1. Unless you know the exact date that you are going to pass away, and if falls within the term you should not rely on term insurance as a suitable form of income replacement. Term insurance is just renting your policy, when the contract is up you walk away with nothing!

  1. Financial conditions change throughout one’s lifetime. A product that would serve a purpose during a particular point in time, may not be beneficial later.

  2. Nice Work! It is interesting to read this post about life insurance myths. Choose insurance policy with maximum coverage and save money. Highly recommend this post!! If you are looking for accurate information and guiding people to choose cheap Insurance plans, you may visit here: insurancemirror.com

  3. Marvin, Myth #1 is so significant. Life insurance is so important in this scenario. Everyone is different, but proper coverage can help out tremendously. The surviving spouse may need additional time to grieve, need time to organize and structure life without their spouse, etc.

  4. Often young families don’t realize why it’s important to get life insurance and how it can help protect their families. Great article!

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