While life insurance is no simple matter, there are plenty of myths and misconceptions about it that cloud the truth and make the whole situation complicated. Listed below are

1. 10 Debunked Myths About Life
Insurance
By Richard Horowitz

2. 1. I don’t need coverage because I’m
single and don’t have dependents
• Every person needs at least
enough life insurance to
cover the cost of personal
debts, medical and funeral
bills.!
• Being uninsured means you
could leave your family with
a legacy of unpaid expenses.!
• Life insurance is also a good
way for low-income singles
to leave a legacy to a charity
they like.

3. 2. My life insurance coverage only
needs to be twice my annual salary
• The amount of life
insurance a person needs
depends on their specific
situation.!
• You might need to pay off
debts and provide for your
family for several years.!
• Cash flow analysis is
necessary to determine the
true amount of insurance
you need to purchase.

4. 3. My term life insurance
coverage at work is sufficient
• Might be true, might not be.!
• For a single person of modest
means, it could be enough.!
• If you have a spouse or other
dependents, or know you’ll
need coverage upon your death
to pay estate taxes, additional
coverage could be necessary.

5. 4. The cost of my premiums
will be deductible
• Not often the case.!
• The cost of personal life insurance
isn’t deductible unless the
policyholder is self-employed and
the coverage is used as asset
protection for the business owner.!
• Then, the premiums would be
deductible on the Schedule C of the
Form 1040.

6. 5. I absolutely have to have life
insurance
• Probably true in most cases.!
• But if you have sizable assets and no debt or dependents, you could
be better off self-insuring.!
• If you have medical and funeral costs covered, then life insurance
coverage could be optional.

7. 6. I should always buy term and
invest the difference
• People who know for certain that they need to be covered at
death should consider permanent coverage.!
• The total premium outlay for a more expensive permanent policy
may be less than the ongoing premiums that could last for years
longer with a less expensive term policy.!
• Consider the risk of non-insurability, which could be a problem if
you have issues with estate taxes and need life insurance to pay
for them.!
• You can avoid such a risk with permanent coverage, which
becomes paid up after a certain amount of premium has been
paid and then remains in force until death.

8. 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
related to both the insurance and
securities elements in a policy. !
• If the variable subaccounts within
the policy don’t perform well, then
the variable policyholder may well
see a lower cash value than
someone with a straight universal
life policy. !
• Poor market performance can even
generate significant cash calls
inside variable policies that require
additional premiums to be paid if
you want to keep the policy in force.

9. • The cost of replacing
the services formerly
provided by a dead
homemaker can be
higher than you think.!
• Insuring against the
loss of a homemaker
could make more
sense than one might
think, especially when
it comes to cleaning
and day care costs.
8. Only breadwinners need
life insurance coverage

10. 9. I should always purchase the return-
of-premium rider on any term policy.
• There tend to be different levels of ROP riders
available for policies that offer this feature. !
• Many financial planners say that this rider isn’t
cost-effective, and therefore 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 amount of the rider elsewhere, as
opposed to including it in the policy.

11. 10. I’m better off investing my
money than buying life insurance
• Until you reach the breakeven point
of asset accumulation, then you need
life coverage of some sort. !
• Once you amass $1 million of liquid
assets, then you can consider
whether or not you want to
discontinue, or at least reduce, your
million-dollar policy. !
• However, you take a big chance when
you depend just on your investments
in the earlier years of your life,
especially if you have dependents. !
• If you die without coverage for your
dependents, there could be no other
means of provision after your current
assets are depleted.