10 Common Life Insurance Myths Debunked

People’s attitudes towards something aren’t always rational or based in fact, but usually based on an emotional response. This is no different for many people’s attitude towards life insurance, and let’s face it, it’s something that would rarely come up as a hot topic at a dinner party.

The subject could be seen as morbid to many, as having to think about the unthinkable - is for many of us, unthinkable. However, if something terrible were to happen and you or a spouse were to pass away, it’s important that any potential financial hardship on you or your family wouldn’t make things even worse.

Recent industry studies have shown that homeowners with dependents aren’t taking out life insurance cover due to falsehoods regarding cover, cemented by many people considering even talking about the subject as a bit taboo. So, let’s break down some of the most common myths.

Myth 1 - Life Insurance is ‘too expensive’

The cost of life insurance is frequently cited as a reason not to take out cover, but this is usually perception rather than reality.

For many, the monthly premium works out at just a few pounds, sometimes less than the cost of a takeaway or daily coffee. When you consider this, many would have to agree that life insurance could actually be considered very good value for money.

If your children, partner or other family members depend on your income to cover their living expenses and the home they live in, you should definitely consider life insurance to help provide for your loved ones in the event of your death.

Government support alone often falls far short of what’s needed, making life insurance a cost-effective way to safeguard your family’s future. Even a small policy can make a big difference. You don’t need to break the bank to provide meaningful financial protection.

Myth 2 - Insurers don’t pay out

Some people worry that insurers won’t honour claims, but data shows that this really isn’t the case as very few life insurance claims are denied. According to the Association of British Insurers (ABI), in 2019, 98.3% of protection claims were paid out.

Once again, data shows that this really isn’t the case as very few life insurance claims are denied. In fact, according to recent figures released by the ABI (Association of British Insurers) in 2019, 98.3% of protection claims were paid out.

Roshani Hill, The ABI’s Assistant Director for Head of Protection and Health stated:

Life insurance is designed to work when it’s needed most, and for the vast majority of families, this would appear to be the case.

Myth 3 - You’re better off with savings

Many consumers still believe they’d be better protected with savings, regardless of the fact that in many cases, it wouldn’t be anywhere near what would be required to cover the costs of critical illness or death.

Having savings as extra protection is (in general) a good idea, as is working towards paying off whatever existing debts you may have, however it shouldn’t be considered a substitute for having life insurance cover in place.

For more information on this topic, see our comparison guide on Life insurance and savings plans.

Myth 4 - Your employer has your Life Insurance all sorted

Whilst any benefit like this is a smart move from your employer — you can’t always assume that the life cover you receive through work is adequate.

Death in service benefit could certainly go towards helping your family, however it probably wouldn’t be enough to cover everything. It’s also worth noting that this cover will likely stop the moment you were to leave your company.

See our guide on Employer Life Insurance vs Personal Life Insurance for more information.

Myth 5 - You won’t get Life Insurance due to your health conditions

Different insurance companies each have their own guidelines for what can be underwritten, including pre-existing medical conditions. Some may be more lenient than others about particular health issues. So, shopping around is the best way to make sure you’re getting a good deal.

It may mean higher premiums in some cases, or certain exclusions, but with guidance, you can usually find a policy that fits your situation.

Myth 6 - You only need to worry about Life Insurance as you get older

This attitude may be due to some confusion between the different type of life insurance policies available and what they’re for. However, regardless of your age - if you have other people who depend on your income and you don’t already have life insurance in place, it’s important that you consider taking out a policy as soon as you can. Whilst you may be young, healthy and in peak fitness, unfortunately you never know what’s around the corner.

Generally speaking, there’s usually no better time than now to arrange life cover, however it’s important to understand what type of cover is right for you, whatever stage of life you’re at.

Myth 7 - Life insurance only pays out on accidents

Many people assume life insurance only covers accidental death. In reality, most standard life insurance policies pay out regardless of how death occurs, provided the policy is active and the terms are met.

Whether it’s an illness, natural causes, or an accident, your family can rely on the policy for financial support. Accident-only policies do exist, but they’re a specific type of cover and are generally less common.

Myth 8 - You don’t need life insurance if you're single

Even if you don’t have dependents, life cover can still play an important role. When you die, your debts don't automatically disappear. Your estate may be responsible for paying off any outstanding debts.

Having a policy could cover such outstanding debts, funeral costs, or leave a financial legacy for your immediate family or a charity.

Myth 9 - Life insurance doesn’t cover critical illness

Some assume that life insurance and  critical illness cover are the same. They’re not. Life insurance provides a payout after death, while critical illness cover pays out a lump sum if you’re diagnosed with a serious medical condition like cancer, stroke, or heart disease.

Many people combine life insurance with additional policies like critical illness and income protection for an extra safety net. In doing so you can protect both your family’s future and yourself if you become seriously ill.

Not all types of illness are covered, however. Often, it varies depending on the insurer's specific terms and conditions, so be sure to talk to an adviser to understand what is covered. Most critical illness policies do also pay out in the event of death. 

Myth 10 - Only high earners need life insurance

Another common misconception is that life insurance is only necessary for people with high incomes. In fact, anyone with financial dependents or obligations can benefit from life cover. This includes people who have mortgages, loans, or daily living expenses to cover.

Which type of life insurance do I need?

The two types of life insurance policies you’re most likely to come across are ‘term insurance’ (the more basic form of life insurance) and ‘whole-of-life’.

Term life insurance

Term life insurance policies run for a fixed period of time (known as the ‘term’ of your policy) eg. 10, 15 or 25 years - and will pay out if you were to die during the term of the policy. There’s no survival lump sum payable at the end of the term.

This type of policy tends to be purchased by those with (dependent) children and mortgages to pay.

Whole life insurance

With a whole life insurance policy, the clue is in the name (known as life assurance by many insurers). Unfortunately, we all die one day, so as this policy is ongoing, it will pay out a lump sum whenever that day comes.

Naturally, whole of life policies are typically more expensive than term insurance policies since as long as you keep paying your premiums, the insurer will always have to pay out, whereas you may outlive a term insurance policy.

This type of policy tends to be purchased by older people who may have children who are no longer dependants, or a mortgage to pay. One of the main benefits of whole-of-life insurance is that it can help your family deal with any bills associated with inheritance tax.

It also may appeal to you if you’re determined to leave some form of inheritance to your loved ones, or if you want to help with your funeral costs.

Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.

Get a quote or get in touch

It can be difficult to navigate the industry jargon and range of options, but it really needn’t be that daunting. That’s where Cavendish can help.

Whether you want to get a quote using our intuitive, step-by-step quote journey or over the phone - we’re here to help you find a cost effective life insurance policy that suits you.