Top 10 life insurance myths

Life insurance is complex, and there is no one-size-fits-all advice. Don't let misunderstandings stop you from choosing the right coverage.

Life insurance is not a simple product. Even term life policies have many elements that must be considered carefully in order to arrive at the proper type and amount of coverage. But the technical aspects of life insurance are far less difficult for most people to deal with than trying to get a handle on how much coverage they need and why. Here are 10 misconceptions surrounding life insurance (and the realities):

Myth No. 1: If I'm single and don't have dependents, I don't need coverage.

Even single people should have at least enough life insurance to cover the costs of personal debts, medical and funeral bills. If you are uninsured, you may leave a legacy of unpaid expenses for your family or executor to deal with. Plus, this can be a good way for low-income singles to leave a legacy to a favorite charity or other cause.

Myth No. 2: My life insurance coverage needs to be twice my annual salary.

The amount of life insurance you need depends on your specific situation. There are many factors to consider. In addition to paying medical and funeral bills, you may need to pay off your mortgage and provide for your family for several years. A cash-flow analysis can help determine the amount of insurance you need.

Myth No. 3: My term life insurance coverage at work is sufficient.

Maybe, maybe not. For a single person of modest means, employer-paid or -provided term coverage may actually be enough. But if you have a spouse or dependents, or know that you will need coverage upon your death to pay estate taxes, then additional coverage may be necessary.

Myth No. 4: My premiums are tax-deductible.