Four Common Misconceptions About Life Insurance

An older woman looks relieved as she leans her head back while sitting in the sun.

(Image credit: Getty Images)

By Karl Susman, CPCU, LUTCF, CIC, CSFP, CFS, CPIA, AAI-M, PLCS

published 13 September 2024

Death and taxes, right? I mean, we know those are the two things we can always count on. On a happier note, one of these we have to deal with only once rather than the other, which we have the joy of facing repeatedly throughout our lives.

So why, if we all die, does literally every single person on the planet not have life insurance? Seems like a no-brainer that if a life insurance policy will pay out moola when you do, then it’s a good deal to have, right? Let me explain with examples of some of the more common rejections to this logic that even Mr. Spock can’t argue with. (For those of you who aren’t pop-culture-inclined, Mr. Spock is a Star Trek character known for his logic.)

Common rejection No. 1: 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.

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

Common rejection No. 2: I have no debt.

Good for you. You are in the incredibly small and ever-shrinking minority of people 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 in debt from college? 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 alleviate the fact that you need money coming in in addition to having less money going out.

Common rejection No. 3: 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?

Common rejection No. 4: I can’t afford it.

Left the best for last. This is a legitimate objection that is worth a conversation. Life insurance does come in many flavors, types and costs, with as 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 eke into your budget. Usually. Not always, but usually if you look hard enough. So, go. Look hard enough.

This isn’t a life insurance sales pitch, despite how it may read. I’m not selling you anything, and it doesn’t help me or hurt me if you rush out and buy life insurance or don’t. But let me tell you a true story. (Warning: This story involves domestic violence.)

I sold a life insurance policy to one of my clients years back. She was, if memory serves, in her mid to late 20s or early 30s. Good health, basic home, average income, job, divorced with a 16-year-old daughter. A few months after she bought the policy, her boyfriend violently killed her. He set the house on fire before killing himself. I received a call from her daughter the next day, and I was in total shock. I made the necessary calls for her to the insurance company, and it overnighted the death benefit check to me. I had it less than 24 hours after I called, which was probably less than 36 hours after her mother died.

My client’s daughter came to my office. I will never forget how she looked — so very young, her eyes red from crying. We sat in awkward silence for a few moments, and I gave the obligatory comments about being sorry, shocked — just what she would expect. Then I handed her the envelope with the check. She asked me if I knew how much it was for. I said I did, at which point she opened the envelope and looked at the check. Her sadness migrated from sadness to shock, then, I dare say, relief. She looked up and thanked me, said it was much more than she was anticipating.

After she offered me far more thank-yous than I had earned, I told her as I walked her out that she had nothing to thank me for. This was all about her mom. Her mom did this, not me. She did it for her.

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. I guarantee it. 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.

If you or someone you know is dealing with domestic violence, you can find free help and resources by calling the National Domestic Violence Hotline at 1-800-799-SAFE (7233) or visiting its website, www.thehotline.org.

Disclaimer

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 or with FINRA.

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Karl Susman is a veteran insurance agency principal, nationally engaged insurance expert witness and broadcast host who translates insurance from jargon to judgment. For more than three decades, he's helped consumers, courts and policymakers navigate coverage, claims and compliance. As Principal of Susman Insurance Agency, Karl works directly with households and businesses to compare options and make clear, defensible coverage decisions.