7 Life Insurance Facts and Myths

Life insurance — do you really need it or not? There are many misconceptions about life insurance that have people opting out and spending their hard-earned money elsewhere. We’re here to clear up the confusion. Let’s take a look at the myths and facts of life insurance, so you can learn the truth about this coverage once and for all.

Myth: Life insurance is too expensive.

Fact: Most people overestimate the cost of life insurance to the point where they don’t consider it at all. But the truth is, a healthy 30 year old female could secure $250,000 of term life insurance for 20 years for around $20 per month* – much less than most people think! Of course, your actual cost would depend on things like your health, age, coverage amount, and type of insurance applied for. And, when you look at life insurance as financial protection for those who matter most — meaning it could help them financially in the future if you were to die — it’s much easier to add it to your budget. Do your loved ones a favor and get a quote from an American Family Insurance agent (Opens in a new tab). They’ll help you determine the right coverage and help you find options that work with your budget.

Myth: Life insurance isn’t important right now because I’m young, single and don’t have any dependents.

Fact: This is one of the biggest misconceptions about life insurance. Some young people don’t believe that life insurance is important because they don’t have any dependents or many assets. But, getting life insurance when you’re young and healthy means you may be able to secure a lower rate on your premium than later in life since coverage typically becomes more expensive as you age. Also, when you consider your debts, like car loans, or credit cards, and final expenses such as funeral costs that would need to be covered in the event of your death, life insurance can help offset the financial burden from your loved ones.

Plus, when you’re young and get a permanent life insurance policy, like our Dream Secure Whole Life Insurance, you can start building cash value, which is a component of a permanent life insurance policy that allows you to borrow** from it later in life to go towards things like a home purchase, college tuition for your kids, retirement income, or even to invest in a business. The younger you start, the earlier you’ll start building that cash value.

Myth: If I have life insurance through my place of employment, I don’t need a personal policy.

Fact: Though life insurance through your employer can be a great benefit, it might not be enough to provide for your family long-term. In fact, a typical payout is usually only around twice your base salary. And, if you were to lose or leave your job, the employer policy may not come with you. Having a personal life insurance policy ensures your life insurance is not tied to your job.

Myth: My kids are all grown up, so I don’t need life insurance anymore.

Fact: You might be an empty-nester, but you probably still care about the financial well-being of your children. There are many benefits of life insurance that help at all stages of your life. It can help pay for end of life costs, like funeral expenses, or perhaps medical bills or hospice in the event you were to die with outstanding medical debt. Life insurance can also help pay for any debts you leave behind, like a mortgage. You can even buy life insurance with the intent to leave your children with an inheritance.

Myth: It would always be better to put my money in savings instead of towards life insurance.

Fact: Many people find that they can put money into savings as well as life insurance. As noted throughout this article, there are advantages to purchasing life insurance, such as having peace of mind that you have put some financial protection in place for your loved ones, should you pass away. Whether life insurance makes sense for you depends on your financial situation, but your agent can work with you to provide options so that you can decide how life insurance could fit into your budget and your savings goals.

As we mentioned before, some life insurance policies allow you to build cash value that can be borrowed** against, while also providing a death benefit for your beneficiaries.

Myth: I'm a stay-at-home parent. I don’t need life insurance because I don’t have an income that needs to be replaced.

Fact: Even if you aren’t bringing in an income because you are a stay-at-home parent, consider the cost of child care. Sometimes, the cost of child care itself amounts to one parent’s income. So, if your surviving spouse (or partner) needs to now pay for childcare, the life insurance death benefit can address those often expensive costs. When you’re a stay-at-home parent, you provide an exceptional benefit that is expensive to replace, so take a good look at what you contribute towards your family’s finances — even though it may not be a tangible paycheck.

Read more about life insurance tips for new families.

Myth: Life insurance is too overwhelming! There are too many options...

Fact: Don’t worry! Life insurance doesn’t have to be difficult. There are many resources we provide to help you better understand your options. Your best resource is an American Family Insurance agent (Opens in a new tab) — they’ll be able to answer your questions — or you can check out our life insurance coverages to help get you up to speed. The more you understand, the better you can protect those who matter most!

This information represents only a brief description of coverages, is not part of your policy, and is not a promise or guarantee of coverage. If there is any conflict between this information and your policy, the provisions of the policy will prevail. Insurance policy terms and conditions may apply. Exclusions may apply to policies, endorsements, or riders. Coverage may vary by state and may be subject to change. Some products are not available in every state. Please read your policy and contact your agent for assistance .

*Premium estimate based on the Preferred underwriting class for a DreamSecure Term Life Insurance policy.

**Any loans taken from your life insurance policy will accrue interest. An outstanding loan balance (loan plus interest) will be deducted from the death benefit at the time of claim. If the loan balance grows too large for the cash value to support it, the policy could terminate.

Life insurance underwritten by American Family Life Insurance Company, 6000 American Parkway, Madison, WI 53783.