Top Five Insurance Myths

By: Anna Martin - Updated: 9 Sep 2012 | *Discuss

 

Decisions about how much insurance coverage you should have – or whether you need it at all – shouldn’t be made without careful consideration. The choices you make will affect you, and your loved ones, later on in life. Opting to believe any of the popular Insurance myths could potentially prove to be a costly mistake.

Myth:

You are the only breadwinner in your household so you are the only person who needs Life Insurance.

The rising cost of living is usually too much for most households to comfortably bear, without some form of financial assistance at some point or other. Now imagine that situation with no breadwinner bringing home the cash.

It is difficult to imagine how your household will function easily if you remove your hard-earned salary. You will have to cover the cost of getting all those chores – housekeeping, food preparation, childcare, transportation bills and home accountancy, to name but a few – done along with your day-to-day living expenses.

Life Insurance coverage is a sensible option for all adults, who have dependant family members, whether they are in paid employment or not.

Myth:

You don’t need Disability Insurance.

If you are injured, or become seriously ill, don’t expect someone else to pick up the bill. You may be able to get Social Security Disability Allowance but that will hardly be enough to cover your day-to-day expenses. You will also have to wait months for any benefits to be paid, and your disability may have to be long-term in order for you to qualify for any payments. You will have to resort to changing your lifestyle dramatically.

Disability Insurance is designed to replace your income, should you be unable to work. Be sure to check your policy for details of any exclusions, waiting periods or compensation complications.

Myth:

If you pay the premiums your insurance should cover you for any accident.

Insurance is meant to protect you from catastrophic disasters. Large scale disasters will require you to seek financial assistance, in order to recover from the affects. If you don’t have enough money saved up to pay off your mortgage, or rebuild your home if disaster strikes, you need to ensure you have appropriate cover to support your needs.

Insurance should be viewed as a protector against possible catastrophic disasters, and not simply as a buffer to dip into. The idea is that you build up a sum that will cover the cost of rebuilding your home if it is burnt to the ground, not that you use the coverage funds to replace a damaged item, like a broken window. A personal loan can easily sort out that little problem.

Myth:

You are alive so you need Life Insurance.

If you have no dependants you will have no need for Life Insurance. This is because this policy is designed to provide the policyholder’s family with sufficient income replacement, in the event of your death. If you don’t have any children, or dependant elderly members of your family, then you really have no need for a Life Insurance policy, as you have no direct beneficiaries.

Myth:

Insurance is too expensive, so just buy the minimum you need.

Is it really worth putting yourself in potential financial danger? This decision could prove to be very costly for you. For instance, not having sufficient Liability Insurance could be a disaster for you if you injure someone in an accident and have to pay for their medical bills. Worse still is if they are paralysed and unable to return to work. You will be having to cover the cost of loss of income, medical expenses and care for the rest of that individual’s life.

All your assets will also be at risk. You could be sued and end up losing everything you have worked hard to gain. Making sure you have more than enough Liability Insurance will safeguard you against this possibility, and give you peace of mind.

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