The Top Life Insurance Myths
Buying life insurance is not at the top of everyone’s shopping list, however, there are some commonly held perceptions and myths associated with this important product that need to be addressed.
Life insurance is not needed if you are young
The chances of mortality when you are younger is certainly less, however, that does not mean there is no chance of dying. Therefore, should the worst happen, life insurance coverage would provide financial assistance to loved ones plus it may also cover outstanding debt such as mortgage or personal loans or credit cards. What is not necessarily widely known is that the likely premiums charged are going to be substantially lower the younger you are and in the case of some life products such as Level Term the premiums are fixed for the duration of the policy. Therefore, the earlier you take out cover, the cheaper it will be.
Insurers Rarely Pay Out on Claims
The media on occasion will highlight instances where life insurers have not settled a contentious claim where the facts are not necessarily widely known. It is fair to say that there is a requirement to truthfully disclose all relevant information when taking out any life insurance in order that the insurer can assess the risk and either decline or sell you cover. In most cases claims are settled in accordance with the policy terms and conditions, however, when a claim is disputed, it is usually because of non-disclosure of key medical information by the policyholder at the time the policy was purchased.
Payouts from Life Insurance are Taxed
Not quite, life insurance payouts received by beneficiaries maybe subject to Inheritance Tax, if they are not placed in a suitable trust and if the threshold has been exceeded in respect of the entire estate. As far as Income or Capital Gain Tax, however, they are not subject to tax at this moment in time. It is important to receive expert advice on life insurance to ensure the policy is placed in a suitable trust (if this is required).
My Employer Provides Life Cover, Therefore, I Don’t Need It
For those lucky employees who receive life cover as a staff benefit, the coverage may not be adequate plus if you leave the organisation whether through choice or redundancy, the life policy is not portable meaning you will no longer be covered. In addition, Life policies offered in most organisations do not cover spouses or dependents.
Life Insurance Premiums are Often Expensive
The cost of living crisis affecting the globe calls into question products such as Life Insurance and the perception in some areas regarding cost. In reality, the assumption that “life insurance is too expensive” is simply not true. The key is to either research the life product which is best for you or consult with experts such as Spectrum Financial Advice for a free no obligation consultation. We can assess your needs and suggest the most suitable life product to ensure you are offered value for money.
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