There's a lot of half-truth around life insurance – partly because it's a sensitive subject we'd rather not talk about, partly because earlier eras of the market gave people reasons for distrust. Here are the six most common myths – and what's true in their place.
- Most myths project experiences with savings-type policies onto pure term life insurance – but the two are different products.
- One characteristic source of payout disputes is inaccurate disclosure at signing – and that's preventable. (A specific proportion would need a named source.)
- "Later" is the most expensive strategy: as time passes, the premium rises, and insurability can worsen too.
"The insurer won't pay anyway."
The typical source of payout disputes isn't bad faith on the insurer's part, but an inaccurate health declaration at signing and not knowing the policy terms. Anyone who discloses honestly and understands the exclusions has a policy that does exactly what it was taken out to do. And if a dispute arises, you're not on your own: the broker helps you.
"It's expensive."
Pure term life insurance is one of the best value-for-money products in the insurance market, because the premium carries no savings element. The "expensive" impression typically comes from the premiums of endowment-type policies – that's a different product with different pricing: the decision map. The premium can be optimised further by obtaining competing offers – which is why it pays to see offers from several insurers through a broker.
"The bank's credit insurance handles everything."
The bank's group credit life insurance protects the debt, not the family: its amount is tied to the loan, its beneficiary is effectively the bank, and the cover itself ends when the loan ends. It doesn't replace the family's expenses – bills, school, everyday life: bank vs. standalone comparison.
"Pointless when you're young."
It's the opposite: taking out cover young and healthy is the cheapest option, and the terms lock in for many years ahead. Anyone who signs up before starting a family covers the later, most sensitive years too, at the premium level set when they were young: starting a family.
"If nothing happens, it's money wasted."
Just as home insurance or compulsory motor insurance isn't "money wasted" if there was no claim: in exchange for the premium, the family lived protected for a decade – that protection is the benefit itself. Anyone who wants to see money back at the end should look at routes combined with savings – knowing the price of that: endowment life insurance.
"It's complicated, I'll never understand it."
Term life insurance can be understood through four figures: amount, premium, term, beneficiary. And you don't have to make sense of the rest on your own – that's what the broker and this Insights section are for: start here: what is term life insurance?
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