Updated: Oct 15, 2020
It's quite rare lately that I find an article about almost ALL the myths surrounding life insurance in one place... but today, I have one!
Let's go through these and see if I have prepared a proper response to some of these notions.
1. BUYING TOO MUCH OR NOT ENOUGH
Not everyone needs life insurance.“ If there’s no one else depending on your income, you probably don’t need much or any at all,” says Alyssa Lum, certified financial planner and founder of Luminate Financial Planning in Sterling, Virginia.
But those with young children will need a lot. For breadwinners, a rule of thumb is at least seven times your annual salary, plus money to pay off debt and fund college. “Those dollars really add up,” Lum says.
Stay-at-home parents don’t need as much, but should have some coverage, says Greg Klingler, a certified financial planner and director of wealth management for the Government Employees’ Benefits Association. Buy enough to cover child care and other services that the stay-at-home parent provides.
My response: This one is actually true... sort of.
What is too much? Too much is an amount you cannot easily afford - either initially or later on. (Insurance companies don't insure anyone for "too much". They're too smart to do that.) However, I don't believe that you can actually buy too much on principle alone. Most people don't have enough to replace their human economic value to their family.