Busted! Don’t Believe These Myths About Life Insurance!
Purchasing life insurance is an important financial decision as it provides you and your family with financial security and protection against unforeseen life events. A life insurance policy can also help you maximize wealth and build tax-sheltered cash accumulation.
In general, people want the benefits of life insurance-based products but are not willing to pay for it. This is primarily due to the persistent myths and misconceptions as well as the stigma associated with life insurance.
To educate you about the truth and help you make more informed decisions, Kelvin Chong & Associates has dispelled a few of the most widely believed myths about life insurance.
Myth 1: You don’t need life insurance
People do not understand the impact their health has on their financial wellbeing, whether it be the risks of prematurely dying, having a life-changing event or the possibility of outliving their resources. Often, you may think that your resources such as your savings or group benefits you have through your employer are adequate to mitigate these risks, however in reality it may not be the case.
Myth 2: Insurance is too expensive
The question to ask oneself is: Expensive in relation to what? Generally people do not realize the magnitude of the financial loss they can face and how cost-effective an insurance solution can be. For example, if we look at disability insurance: a person’s potential cumulative earnings over their working years could add up to hundreds of thousands or even millions of dollars, while the cost associated with insuring that risk could be as little as two to five percent of their annual earnings.
Myth 3: Life insurance only benefits your family once you’re dead
This statement is only partly true. Like any other asset, insurance has a value at the time of death. The difference with life insurance is that the value is guaranteed at the time of death and the proceeds are non-taxable. But while you are living, a life insurance policy can potentially be set up as another asset class that can provide you with distinct benefits, unlike other financial products. Certain types of life insurance contracts allow for various means to access cash when needed most.
Myth 4: Insurance companies never pay
This is a misconception. It is not in the insurance company’s best interest to deny a claim. People have a tendency of not realizing under what conditions a policy will or will not pay. For example, what is standard amongst all insurance contracts is the two-year contestability clause. This clause states that the insurance company has the right to contest a claim within the first two years of the contract taking effect (or last reinstatement date). This allows the insurance company to determine whether a deliberate attempt at fraud or misrepresentation of information was done at the time of applying for the insurance.
At Kelvin Chong & Associates, we complete a needs analysis with our clients to determine and explain the risks associated with their financial situation. Once we identify the specific risks and needs, we recommend the appropriate life insurance-based solutions to them. In addition, we help our clients understand their insurance contract provisions and limitations so that there are no bad surprises when it is too late.
As leading life insurance brokers and agents in Ottawa, Ontario, we genuinely understand the application and implementation of life insurance products, and work with the highest level of competence, compliance, integrity, and creativity.
With a combined experience of over fifty years, we make sure clients find the best options in the insurance industry and navigate them towards leading a healthier financial lifestyle.
Our services include Insurance Audit, Life Insurance, No Medical Exam and Simplified Issue Insurance, Living Benefits Insurance, Critical Illness Insurance, Disability Insurance, Long Term Care Insurance, Health and Dental Insurance, Travel Insurance, Creditor Insurance, Group Health Benefits, Segregated Funds and Annuities, and other Life Insurance services.