All kinds of half-truths, myths and common mistakes are associated with buying Insurance. In this section, Jack Hungelmann shows you the most common ones so that you can avoid falling into any traps. Click on each topic to see the myths debunked.

> Mistake: Trading cash value for death protection needs

> Myth: Buying supplemental group Life Insurance is cheaper

> Mistake: Buying your Life Insurance in pieces

> Mistake: Covering only one income

> Mistake: Ignoring a homemaker's value

> Mistake: Covering the children in lieu of the parents

> Mistake: Being unrealistic about how much you can afford to pay for Life Insurance

> Mistake: Buying before you need it

> Myth: Life Insurance is cheaper when you're young

Mistake: Trading cash value for death protection needs
Being underinsured with permanent Life Insurance may be the biggest single mistake people make in buying Life Insurance. They get swayed by the lure of the investment portion or cash value of the policy but can't afford to have their cake and eat it, too. In other words, they can't afford to pay for all the death protection they need plus the investment, so they buy a cash value policy with less death protection than they need in order to have some investment—something to show for it in the end when they don't (unlike the rest of us) die. However, when they do die, their family doesn't have enough money to live on, creating a serious financial problem.

The most important thing about Life Insurance is the protection it offers. So first things first. Determine how much Life Insurance you need by using a credible method. Then buy as much of that protection as you can afford. If your budget has something left over, only then is it okay to look at permanent Life products for part of your coverage. Never trade critical protection for less-important investment opportunities.

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Myth: Buying supplemental group Life Insurance is cheaper
Group Insurance pools healthy and unhealthy people. Group Insurance rates are, therefore, cheaper only if you're uninsurable or if the employer pays all or part of the premium.

Before buying optional coverage at work, compare the coverage with what the open market has to offer. Chances are you will do as well or better on your own. Plus you can keep the policy when you leave the job.

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Mistake: Buying your Life Insurance in pieces
Buying your Life Insurance in pieces is a lot more expensive than covering all your needs in one policy. Plus, buying in pieces leaves you vulnerable to a gap in your coverage. Examples of piecemeal buying are having mortgage Insurance through your lending institution, credit card Insurance through your credit card company, credit Life Insurance with your car loan, supplemental group Life Insurance at work, flight Insurance at the airport, and so on.

With some of these Insurance policies, you don't have to qualify medically; therefore, if you're in poor health or near death, buy all you can. Otherwise, they're often three or four times the price of what you would pay if you're in good health. When buying Life Insurance, figure out how much Insurance you need to cover all the various needs of those you leave behind—and buy one policy.

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Mistake: Covering only one income
Covering only one income in a marriage is a serious mistake. If your household has two incomes and you depend on both of them, don't just cover one income (unless you have a crystal ball). One income may be larger than the other, but if the person with the lesser income dies and the surviving spouse can't make it on his or her income alone, you have a problem.

When buying Life Insurance in a marriage, always insure both incomes unless the person with the larger income brings home enough pay to completely support himself or herself and the second income is just gravy.

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Mistake: Ignoring a homemaker's value
If one spouse stays home with the children and takes care of the home (cleaning, doing the shopping, and so on), that person has a real economic value to the household because a lot of those services would have to be hired out in the event of death. Many couples overlook insuring the homemaker because no outside income is being brought in. Big mistake.

Buy Life Insurance on a homemaker. Estimate the amount of coverage you need by determining the cost to hire someone to perform the same tasks that the homemaker does. Multiply that by the number of years you need help, and then add in money for an emergency fund and college funds (if, for example, the spouse would have gone to work later to help pay college costs). Also consider funds for longer vacations and shortened workdays for the surviving spouse.

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Mistake: Covering the children in lieu of the parents
When Johnny or Susie is born, you try to be a responsible parent. You're deluged with a lot of solicitations about Life Insurance because of the birth announcement in the newspaper. You have hopes and dreams for your children, so you buy a nice cash value policy on your baby. It's understandable—you're so proud. But the economic effect on the family of a child's death is minimal compared to the major impact that one of the baby's parents dying would have.

When a child is born, seriously re-evaluate and raise the amount of Life Insurance coverage that Mom and Dad have.

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Mistake: Being unrealistic about how much you can afford to pay for Life Insurance
In the 25-plus years that I've been an Agent, I can't tell you how many times I've seen young people commit more money than they can actually afford to a large cash value Life Insurance policy and then two or three years later have to drop it and take a large financial loss - and perhaps even be exposed to the risk of death without Insurance. I recommend Term Insurance for young families. It provides the most coverage for the money spent. If you want a permanent policy later with more bells and whistles, you can always convert your Term policy.

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Mistake: Buying before you need it
Over the years, I've seen many single people with expensive cash value Life Insurance, years before anyone in their life would suffer financially by their death. Remember that you wouldn't buy car Insurance if you didn't own a car. Don't buy Life Insurance unless someone depends on you financially.

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Myth: Life Insurance is cheaper when you're young
Life Insurance really is cheaper when you're young. So are dentures, but you don't buy them until you need them, either. This myth started because the annual cost of Life Insurance is cheaper per year when you're young because your chances of dying are lower. But the total cost that you pay over the life of the policy is not cheaper! How could it be?

Suppose that you buy Life Insurance for $100 a year at age 25 and your friend waits until age 35 and has to pay $110 a year for the same coverage. Now you're both 35, and you pay $10 less per year—but how about the $1,000 that you paid for the 10 years that you didn't need it? Plus interest? Don't buy Life Insurance until you need it.

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