5 Reasons for Not Buying Life Insurance That Are Myths

Old couple looking at life insurance

You know you should buy life insurance. But you’re hesitating, for a host of reasons. You might think you’re too young for life insurance or that no one depends on you financially. You might think that you are already covered through your employer.

Most of the reasons you can come up with for not buying life insurance, though, aren’t reasons at all. They’re justifications.

Kimberlee Leonard, insurance analyst with New York City-based FitSmallBusiness.com, said that people can often rattle off the reasons why they haven’t bought life insurance.

"The reasons people don't buy life insurance are endless," Leonard said.

The truth is that you do need life insurance to provide a financial safety net to your loved ones. If you should die unexpectedly, what would happen to your loved ones? Would they be able to afford the monthly mortgage payment? Would your children have to drop out of their school? Would they struggle each month to cover their basic living expenses?

Life insurance can help make sure your loved ones won’t struggle financially after you die. The reasons you conjure to avoid providing this security? They’re usually based on myths.

Here are some of the more common reasons why people don't spend on life insurance, and why these reasons aren't good ones.

I'm too young and I have no dependents 

One of the most common reasons people don’t invest in life insurance? People say that they're too young.

Leonard, though, says that even young adults can benefit from life insurance. A 25-year-old might think he's too young for life insurance. And if he has no dependents – no one who relies on his financial support -- he might convince himself that life insurance is a not a smart financial investment.

But Leonard gives this example: What happens if this young adult hops on a motorcycle, drives off and dies in an accident? What if his parents who live five states over don't have the money necessary to bring his body home for a proper burial?

A payoff from a life insurance policy might ease the financial burden these parents would face to cover burial costs, Leonard said. These parents could then grieve without worrying about affording a proper burial for their son.

I’m uninsurable

Mike Raines, owner of Raines Insurance Group in Cumming, Georgia, said that people with pre-existing conditions such as heart disease, diabetes, Crohn's disease and multiple sclerosis might think they can't qualify for life insurance or that this coverage would be unaffordable. But Raines says this isn't the case.

Yes, you might have to pay more if you have such a pre-existing condition. But the rates insurers charge for these conditions are not as high as they once were, Raines said. And a growing number of insurers are willing to take on policyholders with pre-existing conditions today, he said.

"Times have changed," Raines said. "People are living longer, and life insurance companies that once highly rated or declined certain conditions can now make offers for coverage."

The message? Don’t let pre-existing conditions scare you away from investing in life insurance.

I'm covered at work

Leonard said that many people rely on life insurance coverage from their employers and don't supplement this coverage with private life insurance policies. This, though, could be a mistake.

Many employer-provided life insurance policies come with restrictions, Leonard said, and might not pay out with every death. Some policies, for instance, might only pay out if the employee dies because of an accident, not because of an illness.

Say you have a partner and young child at home. If you die from cancer and your company policy says it only pays out because of deaths caused by accidents, your beneficiaries will receive no financial support.

Leonard said that you should always research deeper into your company-provided policy to make sure that it will provide enough coverage. If it doesn't, you need to purchase a separate private life insurance policy on your own.

And don't forget: If you leave that job, that employer-provided policy goes away. You’ll definitely need a policy from a private insurer then.

It's too expensive

Jason Veirs, president and owner of San Diego-based Insurance Experts Solutions, says that many consumers think they can't afford life insurance. This, again, is a myth, Veirs said.

"I speak with clients on a daily basis who are always pleasantly surprised by just how affordable term life insurance can be," Veirs said.

An example? Veirs said that a healthy male can qualify for a $1 million 20-year level term policy for as little as $50 a month.

This means that for $50 a month, this policyholder can provide $1 million in coverage for beneficiaries. That $50 a month probably won’t break your budget.

I already have life insurance

You might think that if you already have a life insurance policy you are adequately covered. But depending on your financial situation and your beneficiaries, this might not be true.

David Goldfarb, president of Dallas-based DSG Benefits Group, said that most people even if they already have life insurance policies are dramatically underinsured.

The general rule of thumb is that your life insurance should provide a payout equal to seven to 10 times your annual earnings. If you earn $50,000 a year, you should have about $350,000 to $500,000 of life insurance coverage.

This rule, though, doesn't work for everyone, Goldfarb said.

"Each person has unique needs and should work with a professional to determine not only the appropriate amount of life insurance but also the most suitable type of insurance," Goldfarb said.

An example? Goldfarb said that a single 40-year-old male or female generally needs less life insurance than does a married 40-year-old male or female with children, a mortgage, car payments and other liabilities.