Life insurance is an often overlooked part of a family’s financial plan. However, with the right policy money issues need not be a consideration if tragedy does strikes. People should understand the life insurance process before, during and after they buy policies explains Amy Danise, senior managing editor of Insure.com. Misunderstandings can lead to bad financial decisions. Below are some common myths to be aware of.
Myth #1: There’s a universal database of life insurance policies that I can use to find my relative’s policy number
This problem often starts with the insured person, who never fully divulges where the policy paperwork is kept. Beneficiaries can’t make a claim without knowing at least the name of the life insurance company. Unfortunately there is no company or agency that tracks all life insurance policies sold in the United States.
Myth #2: Anyone can take out a life insurance policy on you
Your friend, neighbor, sibling – even spouse – can’t buy life insurance on you without your knowledge. The application process usually requires a medical exam – or at least your signature on papers.
Myth #3: Life insurance companies look for ways to reject people
When we talk about buying life insurance, we often end up talking about medical conditions and other risks that can knock you out of the market. But life insurers do try to offer life insurance quotes to applicants with medical problems.
Myth #4: I have group life insurance through work so I’m all set
The life insurance you buy through work isn’t portable. If you lose or leave your job, you’ll be without life insurance. It’s a much better plan to buy life insurance on your own.
Myth #5: A life insurance application rejection means you’re uninsurable
A rejection from one company doesn’t mean that others will do the same. It’s important to keep looking.
Myth #6: My spouse is still young and can go back to work if I die
Assuming your surviving spouse will quickly find well-paying work isn’t a good financial plan. Life insurance also allows you to provide college tuition and money for other large expenses if you’re no longer around.
Myth #7: The government will take care of my family
Payments from government sources like Social Security are inadequate to provide financial stability in the event o...