5 common life insurance myths unmasked
During your lifetime, you’ll probably take on many financial responsibilities. These can include car loans, a mortgage, tuition fees, and more. These debts generally don’t disappear after you die.
Life insurance delivers a specified sum of money to your beneficiary or beneficiaries. This can help your family with any debts, living expenses, medical expenses, and more.
The challenge is that myths about life insurance can create some confusion. Many hesitate to explore coverage, because of outdated beliefs they've picked up along the way.
Let’s cut through the noise and give you clear, practical facts about life insurance. Then you can make confident decisions that truly protect the people you love.
Myth 1: Life insurance is too expensive
Life insurance doesn’t have to be expensive. The best way to get a good price? Get permanent life insurance while you’re still young. “Age is the primary driver determining the cost of life insurance," explains Darren Devine, Sun Life advisor. “The younger you are, the more likely you are to have lower premiums.”
If you’re on a tight budget, consider term life insurance. This type of insurance offers a short-term solution. It covers you in the event of death for a fixed period up to a certain age (e.g., 75 or 80). "If you’re young and healthy, your premiums could be as low as $30 a month," says Devine. “It’s a great way to get what you want without compromising your budget."
Term life insurance often costs less upfront. However, the premium isn’t fixed for life. It increases every renewal period.
That’s why it’s possible to upgrade most term life insurance policies to permanent life insurance. Permanent insurance offers lifelong protection, often at a fixed rate.
Myth 2: Life insurance coverage through work is enough
Employer-sponsored life insurance has its limits.
“The main problem is that it doesn’t belong to you. The company owns it. And they have the right to change it at any time,” says Devine.
You may be left with inadequate coverage if your employer changes your plan. For example, the new policy may not cover all your financial obligations, such as paying off a mortgage. And what if you leave your job? Well, then you’ll no longer have access to it.
You may be able to convert your group life insurance into individual life insurance. But it may not have the same features and benefits compared to an individually owned plan. As a result, your new policy may not offer the protection you want.
Choosing individual life insurance gives you greater control and stability. You can choose personalized protection that will be there when you need it.
If you know what you need, get a free quote now.
Myth 3: You need life insurance only to cover funeral costs
The death benefit from your life insurance policy can help pay for your funeral expenses. But it can also pay for your family’s other expenses, such as:
- mortgages,
- personal loans,
- tuition fees, or
- donations.
Ask yourself:
- What are my current expenses for my family?
- Would my family be able to cover these expenses in the event of my death?
With the right life insurance, you can leave them enough money to cover any expenses and repay any outstanding debts. It’s a small price to pay for a lot of peace of mind.
Myth 4: Mortgage insurance is enough
Fact: Life insurance can cover more than your mortgage. Insuring your mortgage is an important responsibility. But mortgage insurance from your bank or mortgage lender may not be your best choice.
The major difference between a life insurance policy and mortgage insurance from a mortgage lender is control. With a life insurance policy, you decide who the beneficiary will be; with mortgage insurance, the financial institution is the beneficiary and gets all of the death benefit.
Your appointed beneficiary gets to choose how to spend the tax-free death benefit from your life insurance policy. That could be to pay down the mortgage or other debts, invest rather than pay off a low-interest mortgage, cover living expenses, or make important purchases.
There are other benefits if you choose the life insurance route:
- You choose how much coverage you want.
- Your coverage amount won’t decrease, unless you change it.
- Your policy won’t be cancelled if you transfer your mortgage to another financial institution.
- After your mortgage is paid off, you could choose to continue your insurance coverage.
These options don’t exist when your mortgage lender controls the proceeds.
Myth 5: You need the same amount of life insurance coverage as your partner
Even if you have the same income as your partner, individual policies are almost always a better idea. Individual coverage can be customized to your respective needs. And a pair of personalized policies helps ensure both you and your partner have the right coverage. That way, you’re not paying a premium for more coverage than you truly need.
An advisor can help you better understand life insurance and the options you have.
By working with an advisor, you can create a customized plan that addresses your needs.
Enter your postal code to find an advisor near you.
Learn more: How much life insurance do you need?
This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting, and tax situation.
