Four Common Misconceptions About Life Insurance

Death and taxes are the two things we can all count on, so the saying goes. If that's the case, why don't more people have life insurance?

It seems that it would be a good deal to have life insurance if a policy will pay out money when you pass on, right? And yet, here are some examples of the more common rejections of this logic.

I have no dependents.

Yes, I’ve heard this before. “I don’t have kids! I’m single! Why would I want to pay for life insurance?” I’m going to go out on a limb here and say you’re not an entirely selfish person, so you do in fact care about things other than yourself.

With that in mind, sure, you have no kids or significant other, but what about an interest in a charitable organization? One that helps other people, other kids, other places? No? How about Doctors Without Borders or the American Red Cross? No? How about animals? If you have a furry friend, then you have a heart for them and their kind. You could leave a chunk of cash to the Humane Society to stop animal cruelty.

In other words, you can make an organization the beneficiary of a life insurance policy if you have no kids or significant other.

I have no debt.

Good for you. You are in the ever-shrinking minority of Americans who have no debt. You’ve done well for yourself, but what about helping those you love and survive you get a jump on their finances? Why not be sure that your kid(s) don’t start out their lives with college debt? Why not be sure that your spouse doesn’t have to go out and find a better job to keep food on the table?

Having no debt is great, but it doesn’t change the fact that you need money coming in in addition to having less money going out.

I don’t believe in life insurance.

Never quite sure where to go with this argument. You don’t have to believe in life insurance for it to work. It is a contract between two parties — you and an insurance company. You pay money to the insurance company, and when you die, the insurance company (with few exceptions) will pay out much more money than you paid it to whomever or whatever entity you wish. No belief required!

If you knew you could buy a stock for $1 and that upon your death it would be worth $500, you’d buy it, wouldn’t you?

I can’t afford it.

This is a legitimate objection worth examining and discussing. Life insurance does come in many flavors, types and costs, with many different benefits as well. Depending on when you buy life insurance, the price tag can vary dramatically.

Chances are, if you plan ahead and play your cards right, you can usually find something that you can work into your budget.  Not always, but usually if you look hard enough. So, go. Look hard enough.

So next time you’re scrolling through your mental list of reasons why you can’t or shouldn’t have life insurance, keep in mind that someday you will die. And when those you care about are grieving, life insurance is one simple and sure way to provide them with some much-needed relief during an extremely painful time in their lives.