Myths about life insurance

Top 7 myths about life insurance

Statement: in the society of the XXI century a high degree of indecision on the choices of individuals is often observed. According to a psychology professor, Victor Vroom, who studied the problem of decisions, “people tend to take decisions that bring the most satisfaction. Each option is evaluated in terms of potential to meet the own needs and desires. The choosing becomes difficult if the options have roughly the same advantages and disadvantages” (Indecişi, oameni imaturi şi nesiguri, Andreea Romanovschi, 2010, Adevarul Online).

 

But in the field of life insurance, the indecision of people when purchasing a life insurance occurs because of certain background factors - myths. Choosing a life insurance is determined in many cases by the beliefs and prejudices taken from various stories which became myths. Although life insurance is considered an expensive product or that it is not a personal necessity, we must look through a more objective range to long-term perspective to understand the characteristics of life insurance.

Below are listed the most common myths about life insurance and the principles that contest them:

 

1. Life insurance is not a necesity when you are young

In an international survey conducted by Confused.com, more than 27% of respondents said they do not need life insurance because they are young and the worry about the financial security in case of death is not a current concern. In an optimal situation this statement could be correct (death is not an issue for young people), but if you look pragmatically at the situation young people are actually the most likely to sign life insurance with capital accumulation. Why? Because young people have better health status than older people, so the risk insured by the insurance company is smaller. So this lower risk allows the assured persons to receive higher face amounts at lower premiums. Being concluded in an optimal time the life insurance allows a good capital accumulation, which can be used at the contract maturity or at the retirement as an additional income to the state pension.

 

2. The independent status of a person does not determine the life insurance as a personal priority

According to this myth, an independent person who receives an income, has no debts and and who has enough savings in his bank account is not forced to buy life insurance. Still though, if older persons, such as parents or grandparents, are relying on you, signing of a life insurance with capital accumulation would be a smart investment. The family is your greatest responsibility, and life insurance with capital accumulation can guarantee a secure future for all family members. In addition, although it is normal to think that nothing bad can happen to us, the accidents are a reality and we must consider the effect of these events on your family or loved ones and in this way you will protect them financially also after you will be no longer together with them or your ability to achieve an income will be lost.

 

3. Your income is what gives you financial stability and not a life insurance

While the income gives some stability for an individual, the level of security that the income provides is basic. However, the situation becomes unsafe when an individual has a spouse or a child and his salary is not sufficient to ensure stability of the entire family in times of extreme necessity. Moreover, an income may have a discontinuous character, depending on the type of job that a person held, or the economical context of a period. Therefore, income does not ensure greater stability as a life insurance with capital accumulation (financial plan with long-term perspective).

 

4. Only the person who provides income in a family needs a life insurance

Indeed, the absence of the person who financially supports the family will have a major impact on the financial security of the family and will mostly influence the standard of living of this family. But the financial role of a parent in charge with the household, the raising and educating of the children, cleaning, cooking cannot be underestimated. If we make a calculation about the salary of nannies, maids, cooks, tutoring with children, surely we will have a picture about the value of the services of the person who is in charge of the house. Thus, the parent household is entitled to conclude a life insurance policy with capital accumulation, in case that the income of the spouse fails to cover all costs of care and education of the children.

 

5. The life insurance included in a housing loan is enough

Life insurance purchased with a mortgage is designed to pay the overdue balance in case of impossibility of payment due to the death of the borrower person. This insurance is not covering also the taxes, the funeral bills and does not provide compensatory income designed to maintain the standard of living before the tragic event. It is true that pain cannot be cured with money, but life insurance with capital accumulation will provide to the family a financial security for these unfortunate events.

 

6. When you are close to the retirement age you do not need a life insurance

It is true that the subscription of a life insurance is more efficient when you are young due to the accumulation over an optimum period and a better state of health, but the withdrawal from work does not mean the death of the person, but the moment when we all have more free time and unfortunately a lower level of income. Just this gap can be covered by life insurance with capital accumulation to enable us to meet the needs and to focus on the nice moments of this period.

 

7. It is better to invest your money in something else for a faster profit rather than subscribing a life insurance

Investment refers to the allocation of cash or capital in the present in order to get a profit in the future, whether it is about a steady income or a capital gain obtained ​​when an asset is resold. The reason people invest is the desire to have more money to ensure their financial security at a higher level, or to be able to enjoy more goods and services at a better quality. Investments are different: shares, bonds, bank deposits, financial instruments based on investor risk profile. But all these investments are unsecured, so the investor can lose the submitted capital. The alternative to these types of investments is the life insurance with capital accumulation, which in addition to the guaranteed face amount provides financial protection during the contract of insurance in case of insured events for both the insured and family members. So the best solution could be the establishment of a diversified investment portfolio with effects on reducing overall risk and cover both the financial needs and those of protection.

 

These myths are the main factors which disturb the correct decision regarding the purchase of a life insurance. The Kunden Broker Company offers the persons who desire to provide a standard of living for the family, parents, etc., in the event of death, the possibility to turn to that information about life insurance based on real evidence, statistics, and then create a list of advantages / disadvantages. However, Kunden Broker de Asigurare SRL has been focusing on a management of maintaining a transparent and direct relationship between the potential customers and financial advisor also for reducing the uncertainty caused by the mass disinformation.