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4 myths you should know about life insurance

Everyone has different life goals and that leads to different protection needs as well. You may think you don't have to spend money on life insurance just because you're young, fresh in the workforce and don't have a family to raise yet. You may even feel you don't need life insurance at all. But is that really true? Let's debunk some common myths young people may have about life insurance.

Myth 1: I'm too young for life insurance

You're young and full of positivity about the future, but here's the thing - unexpected events and accidents could happen to anyone at any time and it's important to be prepared. Essentially, life insurance allows the financial consequences arising from the unexpected to be taken off your shoulders and minimises the financial tumult on your family as well. Accidents could adversely affect your ability to work and your income stream, so if you don't have the right coverage in place, there may be a blow to the quality of life you and your parents are used to having. 

You may not be the main breadwinner of the family, but an accident could still negatively impact your overall household income. Even if your only contribution is cleaning the house or preparing meals, that's still value you bring to the family. If you can't help out with the household chores, your parents may need to hire a domestic helper and that creates extra financial cost. This is why you should always plan for a rainy day, and prepare for the unexpected.

mother and son playing together

Myth 2: Premiums are too expensive

How high or low your premiums are depends on the type of life insurance you choose. There are many types of life insurance plans available out there, including term life insurance, whole life insurance, savings policies, universal life insurance and many more.

Let's take a look at the 3 types of life insurance policies that are suitable for younger folks:

  Term life policy
Whole life policy
Savings policy
Premium level
  • Lower
  • Premiums are adjusted based on the age of the insured upon renewal
  • Medium range
  • Premiums remain unchanged during the coverage period
Higher
Premium payment period
Fixed
Could be 5-, 10-, or 25-year tenors
Could be short or long, typically ranging from 1 year to 20 years
Protection period
Renewable every few years
Lifetime
A specified duration
Sum insured
Medium range
High
Low
Coverage characteristics
  • Pure life insurance, typically with no savings element
  • Generally, the younger you are, the lower the premiums
Combines life insurance and savings policy elements
  • Provides some life protection but the focus is on savings
  • Some policies offer a guaranteed cash payment upon maturity, while some don't offer guaranteed returns

Let's take a look at the 3 types of life insurance policies that are suitable for younger folks:

  Premium level
Term life policy
  • Lower
  • Premiums are adjusted based on the age of the insured upon renewal
Whole life policy
  • Medium range
  • Premiums remain unchanged during the coverage period
Savings policy
Higher
  Premium payment period
Term life policy
Fixed
Whole life policy
Could be 5-, 10-, or 25-year tenors
Savings policy
Could be short or long, typically ranging from 1 year to 20 years
  Protection period
Term life policy
Renewable every few years
Whole life policy
Lifetime
Savings policy
A specified duration
  Sum insured
Term life policy
Medium range
Whole life policy
High
Savings policy
Low
  Coverage characteristics
Term life policy
  • Pure life insurance, typically with no savings element
  • Generally, the younger you are, the lower the premiums
Whole life policy
Combines life insurance and savings policy elements
Savings policy
  • Provides some life protection but the focus is on savings
  • Some policies offer a guaranteed cash payment upon maturity, while some don't offer guaranteed returns

Additionally, when you're deciding on life insurance, your first consideration should be how much protection coverage you'll need, not how much you'd want to pay. Talk to an insurance advisor to customise a coverage plan that's suitable and reasonable for your current life stage, budget and your ultimate life goals.  

With term life policies, premiums are determined based on your age, health status, as well as other factors. Generally, the younger you are, the lower the premiums you'll have to pay, so it's better to get insurance coverage while you're still young. And instead of making monthly payments, you could consider choosing the annual premium option as that usually means the total premium you'd have to pay will be lower.

Myth 3: Insurance is not as good as investing

First of all, even if you already have investments such as stocks and bonds, it's still a good idea to manage your risk by diversifying your investment portfolio. Generally, the risk associated with investment-focused life insurance policies is lower than risk levels generated by investment products. Some coverage policies may also offer cash bonuses and dividends, so they may be a good way to balance out risk exposure and diversify your investment portfolio.

Secondly, just relying on investments may not be enough to generate a stable income for you and your family. When it comes to investing, a higher yield usually means higher risk. If you unfortunately and unexpectedly pass away without protection from a life insurance policy, the absence of a stable income stream might put your family in financial jeopardy.

woman holding a cup and reading a book

Myth 4: It's hard to claim life insurance

Generally speaking, life insurance policies carry fewer exclusions than other types of insurance. As a result, there are usually fewer claim disputes. However, it's important to pay attention to the scope of coverage and exclusions in your policy provisions. You'll also have to declare any existing health issues you may have in order to reduce the chances of your claims getting rejected.

If you've just started your career, it's normal to be focusing your job and getting ahead. But it's equally important not to forget to plan for your future. The right coverage can protect you from life's unexpected events. You can find out more by checking out our LIFE Talk series, which has videos and useful information on how different insurance products can offer you the coverage that's just right for you.