Suze Orman Debunks 4 Common Life Insurance Myths

You know you need life insurance. You need it to protect your loved ones, yes. You might also think of it as a way to help build generational wealth. But shopping for it can be hard, and there’s so much misinformation out there.

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Financial expert Suze Orman knows that parsing through all the information online can be difficult. That’s why she’s devoted time, energy and passion to dispelling some of the common myths around life insurance. Some of her takes may be controversial, but they definitely challenge some of the prevailing myths around life insurance — and could help you make better decisions.

This is one of Orman’s biggest bugaboos when it comes to how people think about life insurance. She wants people to understand that life insurance is actually critical for people who are in their younger years — especially those with dependents or financial obligations. It ensures that the people who rely on you financially would be taken care of if something happened to you before you had the chance to build up your assets or pay off your home.

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Sure, $100,000 seems like a lot of money, especially when you see it in a policy. It’s easy to assume that it would be enough to cover your loved ones. But Orman urges you to dig deeper and do the math.

“You need to figure out that if you have $50,000 a year of income, and that income supports a family, and something happens to you, $100,000 of life insurance will only get them by for two years,” she said. “That may not be long enough.”

Ideally, you want enough life insurance so that the death benefit, if invested wisely, can generate the equivalent of your annual income — year after year.

Many people assume that life insurance is just, well, life insurance. A catch-all term for one-size-fits-all coverage. But that’s far from the truth. There are several different types of life insurance, each with its own structure, costs and benefits.

Two of the most popular types are whole life insurance and term life insurance. Whole life insurance typically covers you until age 100 or 120 and includes a cash value component that grows at a guaranteed rate. However, it’s usually far more expensive than term life insurance.