17 Most Common Life Insurance Myths

LOS ANGELES - Jan. 23, 2025 - PRLog -- Myth #1: Beneficiaries Get Money Based on the Cash Value of a Life Insurance Policy
Do you leave more to loved ones if you don't touch the cash balance?
While actively making premium payments, a permanent life insurance policy grows a cash value. This cash value is separate from the death benefit that is paid out to loved ones. Let's say the death benefit is $100,000 and you've accrued a $150,000 cash value, your beneficiary will get less of that death benefit if you withdraw more than the cost basis, which is how much you've paid into the account in monthly premiums.

If you withdraw money until you reach the cost basis, the policy will stop paying its own premiums with the cash savings. Premiums will be more expensive because life insurance increases as you age. You will risk losing the policy, including the death benefit, if you are unable to pay the rising monthly cost.

Myth #2: You Can't Get Cash for a Term-life Insurance Policy
Can I get money for a term-life policy I no longer need now that my kids are grown?
The question is whether or not you want to renew your term life insurance policy to leave money behind for funeral services and more. When you stop making premium payments, you forfeit that money for your beneficiaries, and they will be left to pay for final expenses if you don't have that coverage.

There is no cash value with a term life insurance policy. There's only a benefit amount and you cannot withdraw from the account. Your only way of accessing cash for a term-life policy is by selling it to a life settlement provider.

Myth #3: Life Insurance Is for Rich People
Isn't life insurance for the wealthy?
It's true that most Americans do not have a life insurance policy but it's not because life insurance is designed for rich people.There are life insurance policies that have a cash component, so you can access tax-free money if there's ever a need for a loan. For people who are finance savvy and want to do some investing, there are higher-yield life insurance policies for those risk-takers too.

Myth #4: I Won't Qualify for Life Insurance Due to Poor Health
Can I buy life insurance if I'm in poor health?
For every individual there is an affordable life insurance option. There are even life insurance policies that don't require ... (continued)

For the full article and 13 more myths, visit https://smartfinancial.com/life-insurance-myths