4 common life insurance myths unmasked

Myth 1: Your life insurance coverage through work is enough

Life insurance through your employer is certainly a perk. But it might not be enough coverage. However, it’s not your only option.

“When it comes to workplace insurance policies, you don’t own the plan,” explains Darren Devine, Sun Life advisor and president of Devine & Associates Financial Services Inc. “The company does. And they have the right to change it at any moment.”

That means changes in your employer’s plan could leave you with inadequate coverage just when you need it most. You may have options to convert your workplace insurance to another, private, life insurance plan. That conversion can have limited features and benefits compared to privately owned plans. This means your converted plan may not offer the exact coverage you want. Locking in private life insurance gives you more control and stability, so your coverage is there when you need it.

Myth 2: Life insurance is too expensive

Paying a monthly or annual premium – the fee you pay for your coverage – can feel like a burden. Purchasing permanent life insurance early is one of the best ways to lock in the most affordable pricing. “Age is the primary driver of cost in life insurance,” Devine says. “The younger you are the more affordable it is.”

If you’re on a budget, ask your advisor about term life insurance. This type of insurance refers to a shorter-term plan that provides coverage over a fixed period of time. This could be five, 10, 20 or more years. “If you’re young and healthy, your premiums could be as little as $30 a month,” Devine notes. “That’s a small price to pay for financial security.”

Term life insurance typically costs less upfront. It’s important to remember that your rate isn’t locked in for life. Instead, it increases during every renewal period. That’s why many term policies come with a feature that lets you upgrade to permanent life insurance. Permanent insurance provides lifelong protection, usually at a fixed rate.

Myth 3: You only need life insurance to cover funeral costs

When you get life insurance, you’re basically purchasing a tax-free death benefit for your family or beneficiaries. The death benefit is the amount of money that’s paid to your beneficiaries after you die.

Sometimes, people see this money as a way of covering off the cost of their funeral. It can certainly do that. But you’ll also want to consider other financial needs your family may have to deal with when you’re gone. Ask yourself:

• What expenses do they depend on me for right now?
• Could they cover those costs if I were to die?

“Your family may rely on you for various living expenses. For example, a mortgage or tuition,” Devine says. “The right life insurance plan can leave them with enough money to cover those expenses and any outstanding debts.”