Life Insurance: Let’s Separate the Facts From Fiction

Think it costs too much and is a hassle to get? You might be surprised by the reality.

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(Image credit: Getty Images)

The past two years have spurred a heightened awareness in families who have realized that they may not be as financially prepared for the future as they had hoped. According to the LIMRA (opens in new tab) and Life Happens 2022 Life Insurance Barometer (opens in new tab), sixty-seven percent of Americans say that the pandemic has been a wake-up call for them to reevaluate their finances, and life insurance is among the top items on their financial health checklists.

We know that there is a substantial gap in coverage for many Americans, with 106 million adults saying they need life insurance or more of it. This can be due to typical procrastination or a misunderstanding of the cost and process of purchasing a policy. September is Life Insurance Awareness Month (opens in new tab), a perfect time to build your knowledge and separate facts from fiction when it comes to this critical financial-protection tool.

Fiction: Life insurance costs too much.

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Fact: Most people overestimate the cost of life insurance.

Nearly 80% of Insurance Barometer respondents overestimate the cost of a life insurance policy. The study confirms that the likelihood of owning life insurance is higher among older generations.

Thirty-five percent of Millennials say they do not own life insurance because it is too expensive, and 45% believe they would not qualify for coverage. Yet, young, healthy adults are actually the most likely to qualify and also secure the best rates. In reality, today’s tools allow you to more easily search for and find policy coverage that fits your budget. It’s OK to start small.

And anytime you work with a financial professional, you can evaluate your coverage.  Over your lifetime, you can adjust your policy choices to meet changing needs.

Fiction: It’s too much of a hassle to buy life insurance.

Fact: Purchasing a life insurance policy is now faster than ever.

Technology advances have greatly simplified many life insurance purchases. In minutes, you can get estimates of coverage amounts and basic costs. In some cases, medical exams may not be necessary.

Prudential and other companies are working to enhance digital platforms and systems to make life insurance accessible to more people, with ease. You can often acquire coverage in days, not weeks.

Of course, more complicated planning scenarios and increased health risks may lengthen the process. But in those cases, that extra time assures you have the solution that best fits your needs.

Fiction: Life insurance benefits are for others, after you die.

Fact: Life insurance can offer benefits for you while you are alive.

In addition to providing a valuable death benefit for your loved ones, many life insurance policies offer cash value that you can use during your lifetime. Certain “living benefits” can help pay for anything from medical care (opens in new tab) to other personal expenses. Talk with a financial adviser to determine what works for you.

Fiction: I don’t really need to make my family rich when I die.

Fact: Planning ahead provides protection from the unexpected.

According to the Insurance Barometer study, 1 in 10 families reported that they would have financial issues by the end of the week if the primary income earner were to die.

In many cases, life insurance is about providing financial protection for your loved ones by replacing needed income. It can give you peace of mind for many circumstances. You choose how much your family will receive. Maybe that’s enough to help maintain their standard of living after you are gone, or it is enough to pay off a mortgage or outstanding loan. What matters most is that planning for the unexpected allows your family to manage financially in your absence.

Talking about end-of-life planning is never easy, and it can be uncomfortable. We can reimagine these difficult scenarios when we see life insurance for what it really is: a smart, easy and affordable way to replace income, save on final-expense taxes, provide funds, supplement retirement and help future generations have more financial security.

It’s the ultimate way of saying to your loved ones: “I love you, and I’ve got you.”

Take action today

Now that you know some of the facts vs. the fiction of life insurance, start taking action to ensure that you and your family have the life insurance coverage you need. Doing your own research or reaching out to a financial adviser (opens in new tab) is a great next step to bringing you closer to providing more financial security for those you care about the most.

The Prudential Insurance Company of America, Newark, NJ.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC (opens in new tab) or with FINRA (opens in new tab).

Salene Hitchcock-Gear, President of Prudential Individual Life Insurance
President of Prudential Individual Life Insurance, Prudential Financial

Salene Hitchcock-Gear (opens in new tab) is president of Prudential Individual Life Insurance. She represents Prudential as a director on the Women Presidents’ Organization Advisory Board and also serves on the board of trustees of the American College of Financial Services. In addition, Hitchcock-Gear has a bachelor’s degree from the University of Michigan, a Juris Doctor degree from New York University School of Law, as well as FINRA Series 7 and 24 securities licenses. She is a member of the New York State Bar Association.