5 Myths about Life Insurance

Most people do not like to think about their mortality, but in order to have a secure financial future for your family and loved ones, having a plan in place for the inevitable is essential. According to a recent AAA Consumer Pulse™ survey, forty percent of Illinoisans do not have a life insurance policy. In fact, nearly a quarter (24%) of residents does not see the need to have one.

“Life insurance is a crucial part of financial and insurance planning,” said Michael Fletcher, Assistant Vice President of Life Insurance Operations, AAA – The Auto Club Group. “Many people either don’t have a policy or not enough coverage and all it would take is one accident or terminal illness to leave your family in financial peril.”

Many people have preconceived notions about life insurance, which are often times incorrect:

1. Myth: Life insurance costs too much.

Truth: Most people tend to overestimate the cost of a policy. Most Illinoisans (62%) believe $250,000 term life policy would cost $200 or more a year. A life insurance policy can be quite affordable. For instance, a 30-year-old, non-smoking woman can get a $250,000 term life policy for under $150 a year. That's less than $3 a day.

2. Myth: I’m a stay-at-home parent; I don’t need life insurance.

Truth: Stay-at-home parents provide a valuable contribution to the household, even if they are not earning a paycheck. A surviving spouse who is employed may need money for child care, housekeeping, and other household tasks that were previously performed without financial compensation.

3. Myth: I don’t need life insurance; I’m single.

Truth: There are many scenarios that make life insurance a good idea for single people. You may have elderly parents who depend on you for their care (or will in the future). You may want to leave funds for a family member, such as a niece or nephew, or even make a financial contribution to an alma mater or a beloved charity. And some life insurance policies can have value other than a death benefit. Universal life insurance, for example, grows cash value over time, and loans can be taken out on the value of the policy at a fixed rate.

4. Myth: I can’t get life insurance because I’m a senior citizen.

Truth: There are policies available to senior citizens that can play an important role in the handling of final expenses, which might otherwise burden a surviving spouse or other family members. The sooner you take action to obtain a policy, the more coverage choices and attractive premiums you will find.

5. Myth: I don’t need to think about life insurance because I have it through my work.

Truth: Nearly two-thirds (63%) of Illinoisans who have life insurance have employer-provided life insurance. While that can certainly be a good starting point, people do need to be aware of what would happen if that company benefit changed or if they left the company. Often times a life insurance policy that isn’t company provided can be a more stable and cost-effective option.

“These are just a few of the common misconceptions some have about life insurance,” said Fletcher. “The best thing you can do is talk with your life insurance agent about the correct coverage for you, such as the AAA Life Insurance specialists at your local AAA branch.”

It is never too late or too early to invest in a life insurance policy. Go to AAA.com/life for more information and AAA Life Insurance products.

AAA Consumer Pulse™ Survey

The AAA Consumer Pulse™ Survey was conducted online among residents living in The Auto Club Group territory from July 13, 2015 to August 1, 2015. Approximately 400 residents in Wisconsin completed the survey. The results have a margin of error of ± 4.9 percentage points. Responses are weighted by gender and age to ensure reliable and accurate representation of the adult population (18+) in Wisconsin.


--from the Chicago office of the American Automobile Association, Sept. 14, 2015