For young couples just getting started, the future can seem boundless. Yet, with new commitments, such as buying your first home or having children, comes the responsibility of making sure your loved ones will be provided for financially, no matter what life may bring.
When you die, life insurance can help your family maintain their standard of living and keep their plans on track.
With that in mind, it's important to know the facts about life insurance. Don't let the following misconceptions stop you from getting the coverage you need:
MYTH NO. 1I only need life insurance if I'm the primary breadwinner.
REALITYYour family relies on your income regardless of whether you bring home the largest paycheck. Stay-at-home parents also should invest in life insurance because they perform valuable services, such as childcare, cooking, cleaning and other household roles which would be extremely costly to hire outside help.
MYTH NO. 2If I still need protection when the term policy ends, I can always renew the policy.
REALITYTerm life insurance is popular among young families, as it typically offers the greatest coverage for the lowest cost. Term policies provide protection for a specific amount of time (the “term”), as well as for needs 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 - since they still need to provide income for a surviving spouse, eliminate debts, pay taxes, etc. Since premiums increase with age, renewing your policy when the term expires can be very expensive. Moreover, poor health may make renewal impossible.
MYTH NO. 3I only need term life insurance.
REALITYTerm life insurance makes sense for many young families, as their need for coverage is great and their budgets are often limited. However, that doesn't mean that term life is the only type of insurance you should consider. Permanent 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, like assets in most retirement-savings plans. You can access the cash values for important uses like a child's education or a business opportunity.
*If these features appeal to you, it might be worthwhile 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.