4 of the biggest life insurance myths — here’s what you actually need to know

Category: News

The advent of social media has given birth to an age of misinformation with terms like “fake news” becoming common. As half-baked facts, rumours, gossip, and all kinds of fallacies swirl around the internet, it can be easy to find yourself questioning what’s actually true.

Opting to take out life insurance can be a stressful and complicated financial decision at the best of times. But if you’re falling victim to misinformation and taking common life insurance myths as fact, it can be a detriment to your decision-making.

FTAdviser reports that 63% of Brits don’t have any active life insurance policy, leaving millions vulnerable should the worst occur. 

Life insurance can be key to providing for your loved ones when you’re gone. It’s vital that you understand all the essential information before opting for your chosen policy, especially if you’re considering not taking out a policy at all.

Read on to discover four of the biggest myths regarding life insurance and what you actually need to know to ensure you make the right choices for your long-term plans.

1. I can’t afford life insurance because it’s too expensive

Smart Insurance canvassed 2000 adults across the UK for a survey on common life insurance questions and myths. They report that 33% of respondents felt they simply didn’t know enough about life insurance. 

One of the common misconceptions about life insurance is that it’s too expensive and can be a burden on your monthly outgoings. 

Smart Insurance’s survey found that 32% of Brits haven’t taken out a life insurance policy because they can’t afford it. 

However, this may not be the case, as the premiums can vary greatly between different providers and policies.

Securing affordable life insurance is possible if you shop around and are in good health. Reassured reports that some policies have premiums starting from as little as £3.61 a month.

The cost of life insurance premiums is largely dependent on a variety of key factors such as:

  • Your age
  • Your medical history
  • If you are a smoker or non-smoker
  • Your weight/BMI
  • The length of the policy
  • The amount of cover.

The table below shows some possible premium rates that a healthy, non-smoking adult could expect if they took out a policy with £100,000 of cover:

Source: Reassured

Legal & General support this claim, reporting that life insurance can be obtained for as little as £5 through their firm.

It all depends on your personal circumstances and how much you can spare each month. A good first step could be to shop around and speak to us before making any big decisions.

2. I don’t need life insurance as I’m still young

When you’re young and healthy it might seem like you’re unbreakable. You may view possible health issues and any concerns about your estate as long-term problems that you’ll tackle at a later date.

Smart Insurance reports that 6% of respondents to their survey stated they didn’t have insurance because they were fit and healthy.

However, this approach could end up being detrimental to your life plans if the unpredictable happens and your circumstances suddenly change.

A serious accident or a life-threatening diagnosis is rarely expected and can turn your whole life upside down.

The point of life insurance is to ensure your loved ones have some form of financial protection should the worst happen to you.

It’s there to help them cope with the financial pressures associated with your death. Funeral costs, a loss of work due to grief, and other factors could have a devastating effect on their circumstances.

If you have children or a spouse, it is essential that you consider a policy. It is also beneficial to talk to your children about taking out a policy themselves if they’re over the age of 18. The cost of life insurance premiums is significantly less the younger and healthier you are when you take out your policy.

It is also possible to combine a policy with critical illness cover, which pays out if you fall victim to serious illness or an accident incapacitates you.

3. There’s no point in having life insurance as insurers don’t pay out

Smart Insurance found that 11% of those surveyed don’t trust a life insurance policy will pay out. 

It is important to first make sure you understand all the terms and conditions of your policy. And second, if the worst happens, make sure everything is clearly documented and reported to make your claim as smooth as possible.

If the qualifying criteria for your policy have been met and your premiums have been paid, obtaining a payout should be a relatively straight-forward process.

The onus is on you to be truthful with any information you provide. Once the worst happens, you — or in the case of your death, your surviving relatives — should make a claim as soon as possible and provide as much supporting evidence and documentation as possible to answer any potential queries.

Statistics from the Association of British Insurers (ABI) show that 98% of all protection claims were paid out in 2020  — totalling £6.2 billion.

4. Life insurance policies are too complicated for me to understand

Many consumers are put off buying life insurance as they find the process complicated and confusing. 

It is important to not let financial jargon and terminology stop you from seeking out financial protection for your family. 

Remember: life Insurance is there to help protect your loved ones should the worst happen. So, it’s vital that you make the right choices.

While the task may seem daunting, there are usually insurance experts to guide you along each step of the process. This may involve:

  • Deciding what life insurance cover you need
  • Finding the right policy terms and monthly premiums
  • Undertaking appropriate checks such as a potential medical
  • Securing the policy that meets your needs
  • Once cover is in place, making sure to meet your premium payments
  • Ensuring your loved ones know the policy exists so that, if the worst happens, they can make a claim.

If you’re worried about the process of choosing the right policy, speak to us.

Get in touch

Planning for life insurance is a key moment in anyone’s financial journey. If you have any lingering concerns about the options before you, please contact us by emailing info@lloydosullivan.co.uk or calling 020 8941 9779.

Please note: 

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.