Life Insurance
No one really wants to think about life insurance or their own passing. But, if someone depends on you financially, it's a topic worth discussing.
Life insurance is a way for people to make sure that their loved ones will be financially taken care of in the event of their death. It provides a death benefit to the beneficiaries designated by the policyholder, which can be used to cover expenses like funeral costs, outstanding debts, and living expenses. In simple terms, life insurance provides financial protection for your family in case you pass away unexpectedly.
Below you will find answers to questions you may already have, but having a conversation is the best way to make the most of your decision on whether or not life insurance may be a solution for you.
Types of Life Insurance
- Term Insurance
Provides coverage for a limited period of time, typically anywhere from 10-30 years. While the most cost effective form of insurance, this type of coverage expires after its period of time. This type of coverage is great for young families, those with limited financial obligations, or others who only need coverage for a specific period of time.
- Permanent Insurance
Provides coverage for your entire lifetime. There are many forms of permanent life insurance, such as whole life and universal life, depending on your specific needs. However, all permanent life insurance includes some element of a cash accumulation portion that can allow for tax-deferred and potentially tax free growth. This type of coverage, while it can be perceived as more expensive than term insurance, can provide additional "living benefits".
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Frequently Asked Questions
Why is life insurance worth considering?
While there are many answers to the question, a single answer can given that life insurance can help provide financial security and peace of mind for those you leave behind. There are also many uses for life insurance, including for individuals, families, and businesses. Life insurance is one of the best ways to help ensure that those left behind are in a good financial place.
What does life insurance cover?
Life insurance can cover virtually any type of expenses, such as:
Immediate Expenses
Funeral and burial costs
Uncovered medical expenses
Mortgage or rent
Car loans
Credit card debt
Taxes
Estate settlement costs
Ongoing Expenses
Food
Housing
Utilities
Transportation
Healthcare and Insurance
Continuing a family business
Future Expenses
College costs
Retirement
Do I need life insurance?
One could argue that if you have anyone or anything you love in life, you should have some level of life insurance. Life insurance can help you protect your family, help keep a family business in the family, or even provide an endowment to your favorite charity or cause.
What are the different types?
There are two main types of life insurance: Term and Permanent. Within these two types, there are additional sub-types. What's important to remember is that term insurance only provides coverage for a period of time, typically 10-30 years. Whereas permanent insurance provides coverage for your entire lifetime.
What is the average cost?
The price of life insurance depends on four main factors: your age, your health, the type of policy and how much coverage you buy. In general, you’ll pay less the younger and healthier you are. You also typically pay less for a term life policy than a permanent life policy.
That said, don’t let your age or health status discourage you from considering life insurance. There are policies available for people of any age as well as those with high blood pressure, diabetes and a smoking habit. (Just know that you’ll generally pay more for your policy if you’re in poor health and/or smoke.)
Still wondering the answer to the question of how much does life insurance cost? If so, here’s a working idea:
A healthy 30-year-old can get a $250,000 20-year level term policy for just $13 a month.
That means that if you purchase that policy and pay the $13 a month without fail, your loved ones would get $250,000 if you were to die at any point during those 20 years.
How much do I need?
A great starting point is to consider 7-10 times your income. However, there are many variables that can offset that need based on individual circumstances, including potentially coverage you may have from a workplace. While there are many online "Calculators" to help determine the amount of coverage you may need, there is no right or wrong answer to the question.
One could argue that some insurance is still better than no insurance. Think of life insurance as a tool to "buy time" for your loved ones. The more insurance you have, the longer they have to be able to adjust to the new realities and be able to continue their plans without financial hardship.
How often should I review my policy?
Everyone's plans for the future change over time, giving reason to periodically review your insurance coverage to ensure its still providing adequate coverage for your needs. Life changes happen, such as a marriage, welcoming a new child, or even entering retirement. All of these are good reasons to review your needs and current coverage.
What are "living benefits" of life insurance?
Some life insurance policies, in particular permanent life insurance products, offer a tax-deferred and potentially tax free cash accumulation vehicle along with potentially other benefits. This cash accumulation can be used later in life to help pay for any expenses or help supplement retirement. Other benefits or riders can include coverage to help pay for long-term care expenses. While considered more expensive than term life insurance, there are also many additional benefits that can be harnessed through a permanent life insurance product.
What happens if an insurance company goes out of business? Are there any safety nets?
Insurance companies invest your premium dollars in conservative investments, such as government bonds, high grade corporate bonds, and the like. Most states have established what is known as a state guarantee fund. This is a fund that helps to cover the policyholders if an insurance company were ever to become insolvent. To review more details regarding your state’s guarantee fund, we suggest going to: https://www.nolhga.com/policyholderinfo/main.cfm
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I'm here to answer your questions.