Life insurance mythbuster

Life insurance can feel overwhelming at the best of times but if you are struggling to differentiate fact from fiction, it can make you feel like giving up.

At Caspian, our goal is to ensure that life insurance is as straightforward as possible and we pledge to do that by ensuring information on all things life insurance is jargon-free and easily accessible.

If you fancy learning more about life insurance and some of the mysteries surrounding it - read ahead…

The basics

Firstly, before we get into the myth-busting, let’s take a look at the basics.

Life insurance is a financial product, the function of which is to financially protect your loved ones in the event of the policyholder (you) passing away. You pay a premium each month, this premium is determined by several factors which are assessed when you initially arrange your policy, such as your health, lifestyle, and occupation.

Your life insurance monthly premium remains the same throughout your policy, however, if you have added indexation onto your policy then your premium will rise by a very small amount each year to align with inflation. If you want to find out more about indexation and how it can benefit your loved ones, click here to read our latest blog summarizing all things indexation.

I already have life insurance through work

Not many people know that having more than one protection policy in place is not just possible but is also advised! So as long as it aligns with your affordability, you can have as many life insurance policies in place as you want.

Different life insurance policies offer different types of coverage so elements that one policy may offer, another will not. For example, many of our clients tend to have a life insurance policy with added critical illness alongside it. This ensures you have a sophisticated level of coverage and can claim for death or being diagnosed with a defined critical illness, whichever comes first.

Life insurance never pays out

False!

There is a common misconception that life insurance policies don’t often payout, however, the stats speak for themselves and with the average payout rate for life insurance currently standing at 98%, the likelihood of your policy paying out is sky-high.*

As life insurance is based on your health, lifestyle and occupation, it is essential for you to be honest throughout the application process as one of the top reasons why a life insurance policy doesn’t pay out is misinformation or not disclosing information.

When your protection specialist arranges your cover, they will run through multiple questions with you regarding your health and lifestyle, to avoid issues when wanting to claim, please ensure you tell the full truth when sorting your life insurance.

You have to be 18+ to get cover

The minimum age you need to be to take out life insurance is 18, however, this doesn’t mean that children cannot benefit from certain life insurance policies. Most major providers include children’s cover for free with their critical illness cover, meaning that if your little one was to be diagnosed with a critical illness included in your cover, then your policy would pay out a percentage of your sum assured.

Leading life insurance providers, Royal London and AIG recently modified their children’s critical illness cover to include a wider variety of definitions and illnesses. Changes such as these ensure that you are always receiving the most comprehensive policy possible.

Life insurance only benefits my loved ones after I die

The function of a level term policy is to pay out an agreed amount when the policyholder passes away, this means that if you arranged this type of policy and you are the policyholder, you will not receive any of the money as you have to pass away for the policy to pay-out.

However, if you have a different type of policy such as a critical illness policy or an income protection policy then the payout from the policy can benefit you as well as your loved ones.

The function of a critical illness policy is to pay out a tax-free lump sum if you were to be diagnosed with a long-term illness from a list of definitions and illnesses. Whereas income protection provides a financial helping hand if you were unable to work due to illness or injury, this policy pays out a payment to you each month that equates to up to 70% of your monthly income.

Smokers cannot get life insurance

False!

You can still get cover if you’re a smoker, however, your premiums may just be a little higher than for non-smokers. Plus, if you’re a smoker and currently looking for an incentive to quit, you might be happy to hear you only need to stop smoking for a minimum of 12 months to be classed as a non-smoker in the eyes of the insurer.

For anyone who vapes reading this thinking you have gotten off lightly, unfortunately, most life insurance providers still class you as a smoker even if you vape! So if one of your 2022 goals is looking into life insurance, or getting a cheaper premium on your current policy, then quitting vaping is a great place to start.

Click here to find out how much you can save by quitting smoking today with our handy smoking calculator!

Income protection is complicated/not worth it

There seems to be a consensus that income protection is complicated to acquire, however, this is simply not the case.

Income protection is a type of life insurance cover that provides you with monthly payments equating to a percentage of your income. The function of this policy is to provide a regular income if you were ill or injured and unable to work as a result. The purpose of these regular payments is so that you can still afford the essentials, focusing your time and energy on your recovery.

If income protection sounds like the type of policy you need and you want to know more then click here to read our ultimate guide to income protection. At Caspian, we’ve also created an easy-to-use calculator that can provide you with an estimated price for an income protection policy in as little as 30 seconds - click here to try it!

I’m better off investing my money in stocks and shares

Life insurance is not an investment, its purpose however is to secure a financial safety net for you and your loved ones.

When investing your money into stocks and shares, you are taking a risk as their value can rise and fall. Whereas, life insurance is more risk-averse as you are paying a set premium each month to ensure your loved ones benefit from the pay-out at the end of the policy term.

There is only one type of life insurance policy

Wrong!

Life insurance is not a one size fits all arrangement and there are a myriad of different types of cover out there!

Not only are there multiple types of cover available but having more than one life insurance policy can be essential depending on your circumstances, as different policies cover different types of situations.

From income protection to critical illness, there is a policy suited to pretty much everyone - it all depends on your circumstances and budget. By speaking to one of our protection specialists, they will provide free tailored advice, ensuring that you find the policy that is right for both you and your loved ones.