As a life insurance agent and expert, you have undoubtedly heard a variety misconceptions about life insurance from your clients. From confusion about certain people not needing life insurance to the different types available, we will break down nine of the most common questions that we have heard.
You can use these responses to answer questions during sales presentations so that you can be prepared for every question that your client may ask.
1. "Stay-At Home Parents Do Not Need Life Insurance"
The services and work done by a parent who chooses to stay at home is worth over $140,000 per year. That is definitely someone worth insuring. From child care to household upkeep, a stay-at-home parent shoulders a lot of responsibility. Insuring this person enables your clients to plan for alternative child care in the case that a spouse passes away while the surviving parent must work.
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2. "Children Do Not Need Life Insurance"
True, children do not contribute to the household income. However, think about the time that a parent or parents would need to recover from the loss of a child. It would be very difficult to bury a child on Friday and return to work on Monday.
Furthermore, if your child develops a medical condition later on, he or she will not lose the coverage obtained as a child; the policy won't lapse when they turn 18 or 21. This provides financial security for the long-term.
3. "Retired People or People on a Fixed Income Can't Afford Life Insurance"
People find a way to purchase something when they recognize that the need is greater than other obligations they have. Many have seen loved ones pass and know they have less road ahead of them than behind.
If someone will experience a financial loss once the retiree passes away, it's a good idea to have a life insurance policy in place so that the spouse or children do not have to deal with a financial burden on top of the loss of a loved one.
4. "There is Only One Kind of Life Insurance"
There are several types of life insurance. All life insurance policies are a variation of one of these types, and not one type fits every person's needs.
Whole life insurance is a permanent policy that is guaranteed to last a lifetime. Whole life insurance has level premiums, so payments always stay the same. Unlike term life insurance, you can earn guaranteed cash value which that builds up within the policy.
Universal life insurance is permanent life insurance that allows for investment savings and offers low premiums. Universal life is more flexible than whole life. It can accumulate cash value which policyholders may access portions of without affecting the death benefit, although taxes must be paid on any cash withdrawals.
Term life insurance provides coverage for a certain period of time. It is designed to pay benefits to beneficiaries should your client die prematurely. Common terms are ten, twenty, or thirty years. Term life policies have no cash value.
5. "Group Life Insurance is All I Need"
Group life insurance is typically paid for by the employer or offered at a very low premium to the employee. However, group life plans are not typically portable. If the person leaves the employer for any reason, including retirement, they lose the coverage.
A group policy often covers only one to two times the annual salary, which may not be enough. These policies often offer limited life insurance coverage options and features from which to select. There is no choice to borrow from a group life policy or cash it in should the need arise.
6. "I Have No Debt, so There Is No Need for Life Insurance"
Life insurance is the best way for a humble person to leave an inheritance. Tax-free death benefits that bypass probate are invaluable to the family left behind. I have never met a man or woman who did not want to leave their children or grandchildren better off. If you love someone, you should have life insurance.
7. "I Would Be Better off Investing My Money"
Life insurance is an investment in peace of mind. We have no guarantee on our number of days. Most life insurance policies give first day benefit, while investments take many years to grow.
When it comes to certain types of life insurance, you can think of it as an investment. With term life insurance, you are paying a relatively small amount in premiums in exchange for a large death benefit. With whole life insurance, you accumulate cash value in the form of a tax-sheltered investment account which the policyholder can borrow against. Having life insurance is an excellent investment tool.
8. "I Have Too Many Medical Issues to Get Approved"
There are carriers that are very competitive for healthy people and those that specialize in the unhealthy. Today, plans are available for almost anyone who is breathing.
Medical advances have made strides in improving the outcomes for many diseases, which has led to better rates. If your client is in remission or has a well-managed chronic condition, you may be able to find a plan with standard or even preferred rates that will suit their needs.
9. "I Will Never Benefit from Having Life Insurance"
It is true that most life insurance is bought for those left behind when we pass. There are life plans now, though, that offer living benefits. These living benefits will pay if the insured goes into a nursing care facility, has a critical illness, or becomes terminally ill. This gives the insured some control over how the funds are used and provides needed income prior to death.
The next time you meet with a prospective life insurance client, keep these answers to the top nine misconceptions of life insurance in mind so that you can be quick to answer any questions. Your ability to clear up any confusion that your clients may have will remind them that you are an expert in your industry.
Do you have questions about life insurance, Medicare, Medicare Advantage, supplements, or getting contracted? Feel free to give us a call at 888-622-9122 and our highly trained agents support specialists will be happy to speak with you. You can also check out our life insurance corner to see all of the carriers that we work with.