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What is Life Insurance ?

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16 myths surrounding life insurance ?

Myth #1 : Savvy wage earners should buy seven times their annual earnings.

Myth #2 : The best deals are obtained over the Internet, bypassing agents.

Myth #3 : Except for the amount, all insurance policies are the same.

Myth #4 : People in poor health can't get insurance.

Myth #5 : Insurance agents are experts in determining what you need.

Myth #6 : Life insurance is far more important than disability coverage.

Myth #7 : Insurance Should be Bought for Every Accident & Disaster.

Myth #8 : If I am Alive, I Must Need Life Insurance!

Myth #9 : I'm the Breadwinner in the Home, So Only I Need Life Insurance.

Myth #10: Whole and Universal Life are the Best Life Insurance Choices.

Myth #11: Flood Insurance is Only for People Who Live in a High Risk Area.

Myth #12: Our Auto Insurance Will Cover Any Accidents.

Myth #13: I Don't Need Disability Insurance...

Myth #14: If I face any medcal expence later,The Government Will support.

Myth #15: Umbrella Insurance Coverage is Just for Rich People.

Myth #16: Who Decide not to Purchase Health Insurance Don't Affect Others.

When it comes to life insurance, even smart shoppers can get tripped up by myths and misperceptions.

Unfortunately, any mistake you make when buying a life insurance policy can have long-lasting consequences. And if your family is not provided for the way you intended, you won't be around to fix it.

You may not have a second chance to make the right decision. To choose the life insurance that's right for you, steer clear of these seven most common myths surrounding life insurance:

Myth #1:

Savvy wage earners should buy seven times their annual earnings.

You may think that because you've followed some rule of thumb that says you should have four, five, seven or some other multiple of your annual income, that your insurance policy will be enough to provide for your loved ones.
So, if you're making $60,000 annually and purchase three times your annual income, or a $180,000 policy, your heirs would be able to safely withdraw only $9,000 each year. "As a general rule, people underestimate how much life insurance they need to generate enough proceeds to adequately support their beneficiaries" .
To calculate how much insurance you'll need, estimate how much your heirs will need to maintain their lifestyle without you. Don't forget to include additional costs they may face in your absence. If you've got young children, for instance, child care costs likely will rise. You also may want the policy to help fund their college education.
Then, add up all other sources of income, such as your spouse's salary or pension, and any Social Security or other government benefits for which they would be eligible. Your life insurance policy should help close any gaps.

Myth #2:

The best deals are obtained over the Internet, bypassing agents' commissions.

"I bought over the Internet, so I must have gotten a great deal."
The Internet is a great place to shop around and check prices. However, you can't assume that you've automatically gotten the lowest price. "If you find a good, reputable agent and they do the job, they'll find a competitive rate that's comparable to what you can find online,"
What's more, the premiums posted on some Internet sites can be misleading. For instance, they may post a rate that few people will qualify for. Or, they may promote an initial rate, and neglect to mention that the premiums will increase over the term of the policy.
In addition, simply comparing rates won't tell you how well the policy fits your needs. "One downside to buying online is that the consumer may not a do a sufficient job of assessing (their own) needs," Before shopping for prices, figure out how much coverage you need, and what type of policy will work best.

Myth #3:

Except for the amount, all insurance policies are the same.

"I don't need to read the policy," many people say. "Besides, I wouldn't understand it." Wrong. Your life insurance policy is a contract between you and the insurance company. It spells out what you need to do to obtain and maintain coverage. It also will identify situations in which the insurance company won't cover a claim. This may happen, for instance, if the policy holder commits suicide within a year or two of the issue date. It also should indicate whether the premiums will remain the same during the term of the policy. Finally, you'll want to verify that the policy accurately reflects the information you supplied in your application. Is the name of the beneficiary correct? Mistakes could cause problems later on. Granted, sitting down to review an insurance policy doesn't sound like much fun. However, it's worth the time.

Myth #4:

People in poor health can't get insurance.

Don't assume that you won't be able to get coverage because you're living with a serious illness, such as diabetes or heart disease. "A lot of companies specialize in this type of coverage," says Mr.Goel. "It may be more expensive, but you can get it. Even if you've been declined by one company, that doesn't mean other insurers also will decline coverage. What's more, one company may cover you only if you pay an added surcharge, while another may charge you its standard rate. For instance, one cholesterol reading might give you a standard rate with one company yet qualify you for a preferred rate with another, notes Mr.Goel. "You really need to shop around."

Myth #5:

Insurance agents are experts in determining what you need.

Many life insurance salespeople and other financial professionals truly look out for their clients' best interests. However, it's important to remember that some are compensated differently for selling different products. That may influence which products they recommend. For instance, some agents work for companies that sell only permanent insurance, such as whole or universal life. As a result, they're less likely to recommend other types of insurance, such as term policies. "Cash value (whole life) polices often are pushed heavily by companies that don't compete in the term market," says Mr.Goel. If you need help, a CPA familiar with your financial situation is probably your best bet for advice on what type and how much life insurance you should buy.

Myth #6:

Life insurance is far more important than disability coverage.

Many people are aware of the importance of purchasing life insurance. They're less likely to recognize how important it is to purchase disability insurance. That can be a big mistake. If you're under age 50, you're 50 percent more likely to be disabled for a period of time than you are to die, says Mr. Goel. "Most people underestimate the fact that they could become disabled." Given the odds, most people will find that it makes sense to purchase term life insurance, which is less expensive than permanent. Then, they also need to purchase disability insurance.

Myth #7:

Hey, You're Paying the Premiums... Insurance Should be Bought and Used for Every Accident and Disaster.

Insurance is designed to protect one from catastrophic disasters. An insurance rule of thumb: If you can pay for the loss or damage without a financial hardship then pay it, otherwise expect your insurance premium to eventually show an increase. Also, buying every type of insurance just isn't necessary. Sometimes the risk is worth taking rather than paying a premium. Learn more at Don't Buy Insurance You Don't Need.

Myth #8:

If I am Alive, I Must Need Life Insurance!

Life insurance is designed to take care of one's dependants after the caregiver's death. If you have no dependants, then you probably don't need life insurance. This includes children and retired persons... usually they don't have people that depend on their income so life insurance for these groups can, in rare instances, be beneficial but is usually unnecessary.

Myth #9:

I'm the Breadwinner in the Home, So Only I Need Life Insurance.

Have you seen the cost of childcare lately? Add that along with housekeeping, food preparation, home accountant, and school transportation. From that list alone one can see how much a spouse really contributes to the household budget. It is estimated a non-working spouse contributes at least, but usually more, the equivalent of a full time job. For this reason it is important to buy life insurance for everyone in the household if the absence of their income would cause a financial hardship.

Myth #10:

Whole and Universal Life are the Best Life Insurance Choices Since I Can Get My Money Back.

Term life insurance is probably the best choice for most. Term life is set for a specific term, like 10-30 years, with a much lower premium than whole and universal life. Your best bet? Buy term life and invest the premium difference in a retirement account.

Myth #11:

Flood Insurance is Only for People Who Live in a High Risk Area.

Everyone who lives in a National Flood Insurance Program area is eligible and can buy flood insurance. These areas are not always prone to floods so even if you think your area is low risk you may be eligible.

Myth #12:

My Son Uses the Car for Delivering the Newspaper and His Pizza Delivery Job. He's Not Self-Employed So Our Auto Insurance Will Cover Any Accidents.

If your vehicle is used for anything but personal use, then you will probably need to extend your personal auto policy to cover business use of your vehicle. Don't think just because you were unaware of your coverages this will get your accident paid for--your insurance policy is a contract that you agreed to adhere to. If you don't understand all the coverages in your contract you need to contact your agent about the questions you have.

Myth#13:

I Don't Need Disability Insurance... If I Become Disabled Social Security Will Take Care of Me.

Don't count on Social Security to take care of all your needs if you become disabled. If you are able to get Social Security for your disability (not all get approved to receive disability benefits so don't assume you will) then you will still have to wait months before you receive benefits and your disability needs to be long-term to qualify. And even if you qualify for benefits, will it match your current salary? Probably not.

Myth #14:

If I Need to Stay in a Nursing Home When I am Older, The Government Will Pick Up the Bill.

Again, don't count on Medicare or Medicare Supplemental Insurance to pick up the bill. If you can qualify, Medicaid may pay up to half of the cost. Choosing long term care insurance can help you pay for the costs of a nursing facility or home care if the need arises. Also, do you really want your family to have to pick up the bill if you acquire a long term illness or disability? Long Term Care Insurance is a great option and if started early in life the premiums can be very reasonable.

Myth #15:

Umbrella Insurance Coverage is Just for Rich People.

Umbrella insurance is not just for the wealthy. With the common occurrence of lawsuits, umbrella insurance is a must for every home, auto, and watercraft owner. Umbrella insurance is designed to give one added liability protection above and beyond the limits on homeowners, auto, and watercraft personal insurance policies. With an umbrella policy, depending on the insurance company, one can add an additional 1-5 million in liability protection.

Myth #16:

People Who Decide not to Purchase Health Insurance Don't Affect Others.

People who choose not to purchase health insurance eventually affect the lives of every Indian. There are many reasons why some Indians are uninsured. Regardless of the reasons, having so many uninsured individuals drives up the cost of goods when people get sick and cannot do their job. In addition, when many people in a company choose not to purchase health insurance, it sends a message to the employer that health insurance may not be an important benefit which in-turn could cost other workers a loss of their health insurance benefit. Also, when healthy people choose not to be a part of their company's health insurance pool, it raises the costs for everyone else because the risk is spread through less people. And, when people make such low wages that they cannot afford health insurance, the number of people eligible for Medicaid rises (which is paid by your tax!).

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