<p><img src="https://static4.businessinsider.com/image/5ede589b4dca687a956f3365-2121/gettyimages-1163568487%201.jpg" border="0" alt="common myths life insurance" data-mce-source="Thomas Barwick/Getty"></p><p></p><bi-shortcode id="disclaimer" class="mceNonEditable" data-type="pfi"></bi-shortcode><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><bi-shortcode id="table-of-contents-sticky" class="mceNonEditable" data-type="h2">Table of Contents: Masthead Sticky</bi-shortcode><aside class="breakout-box headline-regular"><h2>Top life insurance myths</h2><ol><li>Life insurance is just to bury the dead.</li><li>I should just get life insurance online.</li><li>Permanent life insurance is only for the wealthy.</li><li>The insurance I have through work is enough.</li><li><p>You don't need life insurance if you're single with no dependents.</p></li><li>Life insurance is too expensive.</li></ol></aside><p>Most people get the basic gist of life insurance: It's a policy you pay into that provides a death benefit for your beneficiaries. Fewer people are aware that there are other uses for life insurance, such as building wealth and covering you if you're unable to work.</p><p>"A financial plan is built on a strong foundation of life insurance and risk management holding everything uppremature death, loss of income due to illness or disability," said <a href="https://www.prudential.com/advisor/silvia-tergas">Silvia Tergas</a>, a financial planner with Prudential.</p><p>We'll address six common myths about life insurance below. But first, a note: When shopping for life insurance, you should always speak to an insurance specialist or financial advisor who understands the different life insurance products and how you can use them to leverage your financial goals.</p><div><div id="policygenius-price-calculator" data-offer-id="176" data-aff-id="1592"></div><script src="https://www.policygenius.com/price-calculator/calculator.js" type="text/javascript"></script></div><h2><strong>1. Life insurance is just to bury the dead</strong></h2><p>"Life insurance is for the living, not the deceased," <a href="https://www.prudential.com/advisor/rosalyn-glenn" target="_blank" rel="noopener">Rosalyn Glenn</a>, a financial advisor with Prudential, told Insider. "You want to make sure that your family is taken care of, but we've got to start thinking about life insurance as more than just something to bury me with."</p><p>Glenn noted that there are <a href="https://www.businessinsider.com/personal-finance/life-insurance-close-the-racial-wealth-gap-2021-1#'life-insurance-is-for-the-living'" target="_blank" rel="noopener">three main features of life insurance</a>:</p><ol><li aria-level="1">Death benefits to leave a legacy</li><li aria-level="1">Generate income over time for retirement from the cash value built up</li><li aria-level="1">Tax-deferred benefits</li></ol><p>The latter two benefits are only available with certain insurance policies. There are <a href="https://www.businessinsider.com/personal-finance/types-of-life-insurance" target="_blank" rel="noopener">two types of life insurance</a>: permanent life and term life. <a href="https://www.businessinsider.com/personal-finance/what-is-permanent-life-insurance" target="_blank" rel="noopener">Permanent life insurance</a> has a death benefit for your beneficiaries and a <a href="https://www.businessinsider.com/personal-finance/life-insurance-loan" target="_blank" rel="noopener">cash value</a> component that you can use during your lifetime to build wealth and it never expires.</p><p><a href="https://www.businessinsider.com/personal-finance/what-is-term-life-insurance" target="_blank" rel="noopener">Term life insurance</a> also has a death benefit, but there's no cash value and your policy will expire after a specified amount of time.</p><table style="width: 100%; border-collapse: collapse;" border="1" cellpadding="10px"><tbody><tr><td style="width: 50%;"><strong>Term life insurance</strong></td><td style="width: 50%;"><strong>Permanent life insurance</strong></td></tr><tr><td style="width: 50%;"><ul><li>Ends after a specified time frame</li><li>Includes death benefit</li><li>More affordable</li></ul></td><td style="width: 50%;"><ul><li>Never expires</li><li>Includes both death benefit</li><li>Cash value component to borrow against and build wealth</li><li>More expensive than term life</li></ul></td></tr></tbody></table><h2><strong>2. I should just get life insurance online</strong></h2><p>Online quotes are quick and easy, but the downside is that they are "one size fits all." If you want to <a href="https://www.businessinsider.com/personal-finance/cash-value-life-insurance" target="_blank" rel="noopener">build wealth</a>, plan for your retirement, or protect a family-owned business, online quotes aren't going to address those concerns.</p><p>It's also wise to consult a financial advisor, accountant, and estate planning attorney to make sure you have the proper coverage you need for your goals and budget. Your life insurance needs will change as you age, and you'll need to consider <a href="https://www.businessinsider.com/personal-finance/should-you-name-minor-child-as-life-insurance-beneficiary">children</a>, <a href="https://www.businessinsider.com/personal-finance/life-insurance-and-marriage-questions-to-answer-2021-2">marriage</a>, <a href="https://www.businessinsider.com/personal-finance/life-insurance-and-marriage-questions-to-answer-2021-2#what-will-happen-to-your-policy-if-you-divorce'">divorce</a>, retirement, and caring for aging parents.</p><p>A comprehensive assessment will include whether you need <a href="https://www.businessinsider.com/personal-finance/long-term-care-insurance">long-term care</a> life insurance, <a href="https://www.businessinsider.com/personal-finance/disability-insurance">disability insurance</a>, and a <a href="https://www.businessinsider.com/personal-finance/life-insurance-checklist-new-year-2021-1#3.-consider-a-combination-of-term-and-permanent-life-insurance">combination of permanent and term life insurance</a>. An estates attorney is going to make sure you have a will, power of attorney for healthcare and fiduciary in place in case you are incapacitatedalong with other legal considerations like a trust.</p><h2><strong>3. Permanent life insurance is only for the wealthy</strong></h2><p>"Permanent life insurance is the only product that combines every tax favor benefit in the tax code," said Mike James, head of individual solutions and president of <a href="https://www.nfp.com/about-nfp/Executive-leadership/james-william" target="_blank" rel="noopener">NFP Life Solutions</a>. "You can put your money in and take your basis out without paying taxes. No other financial instrument does that. You can actually borrow against it without having to take out any principal. Plus, if you die, it will pay a death benefit to your heirs."</p><p>All permanent life insurance policies have a cash value that grows on a tax-deferred basis. The big difference is how they manage the cash valuein the insurance company's portfolio, stock market, or annuities. A good financial advisor can help you pick the one best for your financial situation and risk tolerance.</p><h3>It's okay to start small</h3><p>Think of permanent life insurance coverage like equity in a home. You may not be able to get your dream home right off the bat, but you can get a starter home that also builds you wealth. With permanent life insurance, start with a smaller death benefit if you can't afford higher monthly premiums, and increase it over time.</p><p>Maria Roloff, a wealth advisor at <a href="https://www.northwesternmutual.com/financial/advisor/maria-roloff/">Northwestern Mutual Insurance</a>, recommends "clients blend insurancesome permanent and term life to fit in their budget allowing for maximum coverage."</p><p>The benefit of <a href="https://www.businessinsider.com/personal-finance/life-insurance-checklist-new-year-2021-1#3.-consider-a-combination-of-term-and-permanent-life-insurance">blending insurance</a> is that even if you can't afford $500,000 in permanent life insurance, having half in term life insurance and the remaining half in permanent life insurance at least gives you the ability to have some coverage that never expires, plus a <a href="https://www.businessinsider.com/personal-finance/cash-value-life-insurance">cash value component</a>.</p><p>Another option is to get a term life policy that can be <a href="https://www.businessinsider.com/personal-finance/converting-term-life-insurance-to-permanent-life-insurance">converted to a permanent policy</a>.</p><h2><strong>4. The insurance I have through work is enough</strong></h2><p>Most employers offer some sort of <a href="https://www.businessinsider.com/personal-finance/group-life-insurance">group life insurance</a>, usually equal to your salary, for free or at a low cost. One disadvantage of employer-provided group life insurance is that if you leave your jobresign, retire, or are terminatedyou lose coverage. Another disadvantage is that it may leave you underinsured.</p><p>Half of Americans who have life insurance are <a href="https://www.businessinsider.com/personal-finance/how-much-life-insurance-do-i-need" target="_blank" rel="noopener">underinsured</a>, meaning their death benefit would not cover expenses like mortgage, college, food, debts, and clothing for dependents in the event of their death.</p><aside class="quick-tip headline-regular"><p>When selecting your death benefit amount, the rule of thumb is to select <a href="https://www.businessinsider.com/personal-finance/how-much-life-insurance-do-i-need#how-much-life-insurance-do-i-need'" target="_blank" rel="noopener">10 times your annual income</a>. For example, if you make $75,000 per year, then you would purchase a life insurance policy for $750,000.</p></aside><p>Typically, group life insurance won't allow you to get 10 times your income. That's why it is recommended that you have a personal individual life insurance policy outside of your work group life insurance.</p><h2><strong>5. You don't need life insurance if you're single with no dependents</strong></h2><p>If you're interested in building wealth, leaving a legacy, supporting yourself during retirement, or protecting yourself if you're disabled or injured, you should consider life insurance. This is especially true if you're a woman.</p><p>A woman will most likely outlive her male partner and may also be a caregiver for elderly parents. A dependent isn't necessarily a child, but can include elderly parents or an adult special needs relative.</p><p>"The only person to take care of the <a href="https://www.businessinsider.com/personal-finance/women-plan-for-retirement-life-insurance">older woman</a> you will become is the young woman you are today," said <a href="https://www.prudential.com/advisor/barbara-pietrangelo" target="_blank" rel="noopener">Barbara Pietrangelo</a>, and financial planner at Prudential. "You can be young without money, but not old without money."</p><h2><strong>6. Life insurance is too expensive</strong></h2><p>If cost is a concern, get as much life insurance as you can <a href="https://www.businessinsider.com/personal-finance/affordable-life-insurance">afford</a> to now and consider increasing coverage later. It's easier and cheaper to get life insurance when you're young and healthy.</p><p>If you're on a fixed income or have health issues that prevent you from getting a traditional life insurance policy, there are <a href="https://www.businessinsider.com/personal-finance/no-medical-exam-life-insurance">no medical exam life insurance</a> policies.</p><p>If you're older, consider <a href="https://www.businessinsider.com/personal-finance/funeral-insurance-a-good-addition-to-your-life-insurance-policy">final expense insurance</a>. Final expense life insurance is a type of no medical exam guaranteed issue life insurance, referred to as "<a href="https://www.businessinsider.com/personal-finance/funeral-insurance-a-good-addition-to-your-life-insurance-policy">funeral insurance</a>" because the coverage amounts are so low that they basically only cover <a href="https://www.businessinsider.com/personal-finance/funeral-insurance-a-good-addition-to-your-life-insurance-policy">funeral and burial expenses</a>.</p><aside class="breakout-box headline-regular"><p>If you are considering life insurance or want to understand how other life insurance products work for building wealth or as an investment tool, talk to an insurance specialist who understands the various <a href="https://www.businessinsider.com/personal-finance/types-of-life-insurance#types-of-term-life-insurance-policies-">types of term life</a> and <a href="https://www.businessinsider.com/personal-finance/what-is-permanent-life-insurance#types-of-permanent-life-insurance-policies-">permanent life insurance</a> products.</p><p>Contact your bank or credit union to see if they provide financial counseling. It's good to include your accountant and estates planning attorney in these discussions to make sure you get the right coverage for your financial needs and goals.</p></aside><p><em>Ronda Lee is an associate editor for insurance at Personal Finance Insider covering life, auto, homeowners, and renters insurance for consumers. She is also a licensed attorney who practiced litigation and insurance defense.</em></p><bi-shortcode id="related-content-module" class="mceNonEditable" data-type="more-on-life-insurance" data-sheetname="More on Life Insurance">Related Content Module: More on Life Insurance</bi-shortcode><p><a href="https://www.businessinsider.com/personal-finance/common-myths-about-life-insurance#comments">Join the conversation about this story »</a></p>
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