10 Myths about life insurance debunked
There are many myths surrounding life insurance, perhaps because the subject of death – and a subsequent life insurance claim – is not a topic that most of us want to think about. So to clear up these misconceptions about life insurance, and to help you get the cover you actually need, we’ve put together a handy life insurance myth-busting guide.
Myth 1: Life insurance is only for the main earner
It’s a myth that life insurance is just for the ‘breadwinner’. You don’t need to be the main earner for your death to have a huge financial impact on your family. For example, if you take care of the children or the household while your partner is at work, a cash sum could cover childcare costs or pay for extra support around the house. This could give your partner the option to continue working should the worst happen to you.
Read more about life insurance for your family.
Myth 2: Young people don’t need life insurance
You’ll need to be at least 18 years-old to take out a life insurance policy, but once you’ve reached adulthood, age in itself should not rule you out from getting life cover. Most people take out life insurance if and when they have financial dependents – this may include children, but also adults who rely on you financially, such as a partner, or in some cases, parents.
So while you may prefer to get life insurance if you’re married, a homeowner or have children, who’s to say this won’t happen while you’re young? It’s also the case that if all things are equal, life insurance is cheaper when you’re young. This is because insurers price life insurance on the basis of how likely it is you will die during the policy term; unsurprisingly, age is considered a risk factor.
For more information on when to consider life cover, read our article: When should I get life insurance?
Provided a valid claim has been made, a payout will be processed. There are a number of criteria that will need to have been met; for example, the policy must be in force, the premiums will need to have been paid; the information provided during the application stage will need to have been accurate.
Read our guide for more information on how life insurance pay-outs work.
If someone tells you life insurance is too expensive, they may want to think again. Legal & General’s Life Insurance starts from £5 a month, depending on your needs and circumstances, which is equivalent to about 17p a day. Ultimately, some would say that not having life insurance could end up being more harmful than spending a relatively small amount on premiums each month.
Myth 5: Life insurance payouts are always taxed
Life insurance payouts are exempt from Income or Capital Gains Tax. Depending on the value of your estate when you die, the payout may be subject to Inheritance Tax (IHT).
By placing your policy in trust it should help to ensure that any money paid out from the life policy would not be part of the estate, helping to minimise IHT. This should also help to ensure that the money paid out from the life policy can be paid to the right people quickly, without the need for lengthy legal processes.
Check out our guide on life insurance and tax for more information.
Myth 6: I don't need life insurance because I get it through work
Some employers may provide life cover as an occupational benefit. However, even if this applies to you, it could still be a good idea to consider whether it meets your personal protection needs. For example, it is unlikely that you will be able to choose a specific amount of protection, and it may not cover your partner.
You should also consider what would happen to your Death in Service cover should you lose your job. Read our guide on death in service vs life insurance.
Another life insurance misconception is that you’ll have regular health check-ups after your policy starts. Don’t worry – once you have your policy in place you will not be asked to provide annual health check-ups
You aren’t normally required to take out life insurance when you get a mortgage, but it may be a good idea. A mortgage may be one of the biggest financial obligations you ever take on, and so having life cover in place can give you peace of mind, especially if you're worried about how your loved ones would manage financially without you.
Check out our guide for more information about life insurance and mortgages.
Myth 9: I will need a medical examination to get life insurance
It depends on the individual, their circumstances, and the amount of cover applied for. But in our experience, a medical examination is not always required when you apply for life insurance.
Read our guide for more information on medical examinations.
Myth 10: the insurer will run a credit check on me
Insurance providers don’t require a credit check before they offer a life insurance policy. Remember, the cover you choose will depend on your circumstances and needs. Find out more about the life cover products we offer.