11 Myths About Life Insurance Exposing The Truth

Elaine Brookes Steve Case

Author: Steve Case - Insurance Expert

Reviewed & Fact Checked By: Elaine Brookes

Updated: 22nd March 2024

myths about life insurance

Do you know there are several common misconceptions and myths about life insurance and whole-of-life insurance in the UK, and these tend to be perpetuated worldwide?

Many people don’t fully understand how life insurance works, which can lead to confusion and, thus, the perpetual churn of these myths.

Many experts point to the rampant misinformation about life insurance by people who are not knowledgeable about the industry as the reason for many of the myths people have started to assume as fact.

Then there is also the fact that life insurance providers have largely not done enough to debunk these myths, mainly because they don’t see it as necessary.

Fortunately, we’ve taken the time to bust several of these common life insurance myths.

We’ll dispel the following misconceptions/myths surrounding life insurance or life cover, including the following:

  • Life insurance is only necessary for older people.
  • Life insurance policies are expensive.
  • Only the breadwinner needs life insurance.
  • Life insurance is unnecessary if you have savings.
  • Life insurance is a scam.
  • Insurers don’t pay in the event of a death.
  • I’ll have to undergo a medical exam.
  • Life insurance is confusing.
  • A stay-at-home parent does not need life insurance.
  • Life insurance is needed to get a mortgage.
  • You can’t get life insurance with a pre-existing condition.

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Myth #1 – Life Insurance Policy Is Only Necessary For The Elderly.

The myth that life insurance is only necessary for the elderly is a common misconception that can be detrimental to younger people who may not have considered the possibility of unexpected death or disability.

Many young adults may feel that they are too healthy or too young to need life insurance, but the reality is that anyone with dependents or debts to pay off can benefit from life insurance. So, buying life insurance should be seen as being an investment in the financial stability of your family.

For example, suppose a young couple has a mortgage or other debts. In that case, life insurance can provide financial security for the surviving spouse or family members in the event of an unexpected death. Additionally, life insurance can help pay for funeral expenses, which can be a significant financial burden for loved ones.

The benefit for young people is that they can secure life insurance at a lower cost than older individuals because they are generally healthier and less likely to have pre-existing health conditions. Thus, the earlier someone purchases life insurance, the lower the cost may be over time. 

Myth #2 – Life Insurance Premiums Are Expensive.

The myth that life insurance is too expensive is a common, essentially global misconception preventing many from considering it as an option. Sure, the cost of life insurance can vary depending on factors such as age, health, and lifestyle habits, but it’s more affordable than the myth has people believing.

For instance, term life insurance policies are often the most affordable option, with coverage available for a predefined period, such as 10 or 20 years.

Life insurance policy costs can be influenced by factors such as the policyholder’s age, gender, occupation, lifestyle habits (such as smoking), and health status. For example, younger individuals with good health and a low-risk lifestyle may be able to secure life insurance at a lower cost than older people or those with health issues.

It is worth considering that the cost of life insurance may be outweighed by the financial security it provides for loved ones in the event of an unexpected death or disability. Consider the fact that, at the very least, it will cover funeral costs, which seem to rise exponentially each year.

Myth #3 – Only The Breadwinner Needs Life Insurance.

The myth that only the main breadwinner needs life insurance is a common misconception that can leave other family members financially vulnerable in the event of an unexpected death.

The main breadwinner may need more coverage, but anyone with dependents or financial responsibilities can benefit from life insurance.

For example, a stay-at-home parent providing childcare and household support may not have a salary, but their contributions are still valuable and would be missed if they could no longer provide them. Life insurance can help cover childcare costs or other services that may be needed in the event of their death or disability.

Family life insurance can provide financial support for other family members, such as elderly parents or disabled siblings who may be dependent on the policyholder. The policy ensures that they can maintain a high standard of living while having access to needed care and resources.

A life insurance policy can help cover debts or expenses that may be incurred after an unexpected death, such as funeral costs or outstanding bills. This can assure peace of mind for the policyholder and their loved ones, knowing that financial support is available in the event of a tragedy.

some benefits of life insurance infographic

Myth #4 – Life Insurance Is Unnecessary If You Have Savings.

While having savings is an essential part of financial planning, it may not be enough to cover all expenses in the event of an unexpected death or disability. Life insurance can provide additional financial support for loved ones and help ensure they are not burdened with financial obligations they cannot afford.

For example, in the event of a sudden death, immediate expenses such as funeral costs, medical bills, and legal fees can add up quickly. Even if an individual has savings, these expenses can quickly deplete their funds, leaving loved ones responsible for paying these costs and jeopardising their financial future.

Additionally, life insurance can help cover long-term expenses such as mortgage payments and education expenses and replenish retirement savings that would otherwise be lost in an unexpected death or disability.

Myth #5 – Life Insurance Companies Are A Scam.

The belief that life insurance is a scam or a way for insurance companies to make money is a common misconception that continues to prevent individuals from securing crucial financial protection for themselves.

While it’s true that insurance companies make money by selling policies, life insurance can provide significant financial security for loved ones and peace of mind for policyholders.

Life insurers must undergo several levels of scrutiny to receive a license. They must also employ underwriters, salespeople, and other professionals to create awareness about life insurance products. Scams are largely unregulated, and thus life insurance does not fit the definition of a scam.

In the event of an unexpected death, life insurance can provide financial support to loved ones who may be left with significant expenses, such as funeral costs, medical bills, and ongoing living expenses. This can help ensure that loved ones are not left with a significant financial burden during an already difficult time.

Myth #6 – Insurers Don’t Pay In The Event Of A Death.

The main purpose of an insurance company is to pay out claims when the conditions in the policy are met. It’s important to remember that insurance policies operate under the principle of utmost good faith, meaning that the policy’s validity is based on the accuracy of the information provided by the customer.

To keep the policy in effect, regular premium payments are necessary. Most insurers have digitised their processes, including claims, to make them more convenient for policyholders.

The life insurance payout may not be immediate because certain pre-defined conditions need to be met, and that’s largely to minimise instances of fraud.

So, in a nutshell, life insurance payouts aren’t held back or denied, which is why millions of people continue to invest in an insurance policy.

However, ensure you understand the life insurance policy before signing up for it. Every life policy may appear to be exactly the same, but you should make sure to fully understand what you’re getting and the conditions of the death benefit.

Usually, the policy payout covers all forms of death except for suicide in the first year of the policy. Whether you’re an individual or a family, it’s essential to identify your unique financial needs and find a plan that suits you best. You may want to seek advice from an insurance agent or compare policies online before deciding.

Myth #7 – I’ll Have To Undergo A Medical Exam.

This is a myth that has been circulating for quite some time now because it is often confused with getting health insurance. When you apply for health insurance, an insurer will require that you take a medical exam, but that’s not the case with life insurance.

When you apply for life insurance, the insurer will request that you answer a couple of questions about your lifestyle and health. It is part of the application process as it helps the insurer understand if you are eligible for the policy.

So, if you are one of the 3% of people who do not have life insurance because they don’t want to take a medical exam, then be assured that it’s not mandatory.

Many insurers in the UK guarantee acceptance, for most people between 30 and 80, without a medical examination. 

Myth #8 – Life Insurance Is Confusing.

Around 7% of people have said that they don’t have life insurance because the process and types of insurance are too confusing. This myth has something to do with the various types of insurance policies available, and many times, the proverbial devil is in the details of these policies.

However, if you don’t want to wade through financial jargon, you can always get an insurance agent to help you cut through all the policies offered across the insurers they represent. The fact that life insurance is confusing to you shouldn’t put you off from securing your family’s finances.

Apart from working with an insurance agent, you can also research the many life insurance policies available in the UK.

Myth #9 – A Stay-At-Home Parent Does Not Need Life Insurance.

We’ll suggest a rebuttal to this myth with a question: if the stay-at-home parent passes away, will the breadwinner of the household be able to pay expenses related to bringing up the child or children? Will they need to cut back on how many hours they work each week or maybe even change their career path to raise the children?  

While many people may not have done the math, experts say a stay-at-home parent is valued at over £100k. That’s why both the breadwinner and the other so-called stay-at-home parent should have life insurance.

Then there is also the fact that while average life expectancy in the UK has increased on average, serious illness and other problems can lead to a person’s untimely demise.

Myth #10 – Life Insurance Is Needed To Get A Mortgage.

We are still determining where this myth originated, but in the UK, you are not required to have life insurance to get a mortgage. However, a mortgage may be a substantial debt in any Brit’s life, and thus, it is worth protecting. 

Having life insurance means that if you pass away, your partner will be able to pay off the mortgage or make regular repayments. Life insurance isn’t a pre-requisite to getting a mortgage but proceeds from the insurance policy can help pay off the mortgage because your loved one isn’t financially constrained without you.

Now there are instances when a lender may ask that you take out life insurance as part of their precondition to approving your mortgage application. This is mainly done so that the mortgage company is covered in the event of your demise.

They (the mortgage lender) may also ask that you get cover from their preferred insurer, but you won’t get the best deal when taking this step. Fortunately, you should be able to find a good life insurance policy with a bit of research.

Myth #11 – You Can’t Get Life Insurance With A Pre-Existing Condition.

It is essential to evaluate this myth in the right context. When it comes to life insurance, the average pricing considers the person’s health condition and lifestyle choices. That means when a person is older, usually above 50, and has a severe medical condition, the risk of death is higher, and thus the premiums may be more expensive.

Depending on the pre-existing condition, you should be able to get a life insurance policy. That said, you should always consult with an expert to determine if you will qualify for a life insurance policy based on your present medical condition and age.

Myths About Life Insurance: Final Thoughts

The life insurance industry is one of the many industries that is unfortunately plagued by misinformation and incorrect information circulated by people who aren’t aware of how the industry works. These myths aren’t backed by statical facts or any other data.

Hopefully, this article has helped clear things up for you, putting you in a better position to decide if life insurance is the right choice.

Whenever you encounter a life insurance myth, always speak with an expert about it. However, most myths can also be cleared up with a Google search.

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