Life Insurance Myths for the Young Family

The future can appear boundless for a young family. Yet with commitments like buying your first house and lot or having children come the responsibility of ensuring that your family would be taken care of. Since you can't predict future uncertainties, you and your family need some protection.

The most essential and basic available protection is life insurance. It helps you guarantee that you maintain your standard of living and that the future needs of the family are met. However, there are myths that prevent young families from purchasing life insurance.

Myth # 1

The first common misconception is that you only avail life insurance if you're the family's primary breadwinner. If you have a job, even a small income may help you fund some items you need and important family activities. Also although stay-at-home parents may not generate cash income, they usually provide useful services, their replacement costs are usually underestimated.

Myth # 2

Another common misconception about life insurance is that you only need it when your children are young and when you have great financial obligations. There's no doubt insurance needs can be great when children are young, but for those who need insurance later in their life, permanent policy is usually a perfect choice.

Permanent insurance not only provides lifelong protection, it also accumulates cash values that can be withdrawn or borrowed against.

Although doing so may have some effects on tax and on the death benefit. While term premiums are generally lower than permanent insurance premiums when first bought, the latter typically doesn't increase over time. Depending on the policy, it can stop totally later in life, even as the coverage continues.

Myth # 3

Another myth is that if you purchase a term policy and find out later that you still need some protection when it expires, you can always renew this term policy. For many young families, term policies are an obvious choice. For one, term policies usually provide the greatest coverage at a significantly lower cost.

Many families, however, realize that there is still a need for insurance even after the children are gone. Renewing the policy when it ends can be very expensive since premium rates increase with age. Also, poor health may make the policy renewal highly unlikely.

Myth # 4

The fourth myth about purchasing life insurance is that you can have a much better rate of return if you invest you money elsewhere. Although the basic reason for purchasing life insurance is to provide family protection, permanent insurance policies (variable life, universal life, or whole life) provide other features attractive to many young families.

In particular, permanent policies offer cash accumulation values that increase over time and that can be borrowed against.