DO I NEED LIFE INSURANCE?
If someone depends on you financially, you are most likely someone who needs life insurance.
Life insurance provides cash to your family or loved ones after your death. This cash, known as the death benefit, replaces your income and the many non-paid ways you support your household. Your family can use this cash to pay for expenses like funeral costs, a mortgage, college tuition and more.
Just a few examples of people who often answer “yes” to the question of “Should I get life insurance?” include:
- Married or partnered couples
Many partners find it difficult to make ends meet without the other earner’s income in the picture.
- Married or partnered couples with kids
In addition to losing one partner’s income, the surviving parent may have to pay for childcare and more without the other parent around to pitch in.
- Single parents
As the sole income earner for your family, you’ll want to think about how to replace your child’s only source of financial support.
- Stay-at-home parents
From cooking meals to shuttling kids to school to helping with homework, stay-at-home parents perform many critical responsibilities that would be costly to outsource.
- Empty nesters
Many surviving partners would not be able to maintain the lifestyle they worked so hard to achieve without life insurance.
- Retirees
Depending on the size of your estate, your heirs could be hit with an estate-tax rate of up to 45%. Fortunately, cash from a life insurance policy gives heirs access to tax-free money to pay for immediate costs and more.
- Business owners
Life insurance can help your business in many ways if you, a fellow owner or a key employee were to pass away
WHAT IS THE AVERAGE LIFE INSURANCE 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.
WHAT DOES LIFE INSURANCE COVER?
Life insurance covers virtually any type of living expense. Some common expenses include:
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, health care and insurance, continue a family business
Future Expenses: College costs, retirement
WHAT IS THE PROCESS OF GETTING LIFE INSURANCE?
When you apply for life insurance, your life insurance application goes through a process called underwriting. Underwriting is when your insurance risk is evaluated. Approval and costs are based on your risk class.
There are two types of underwriting: traditional underwriting and simplified underwriting. In traditional underwriting, you fill out a formal application and typically undergo a short medical exam. It can take several weeks to be approved when the life insurance application undergoes traditional underwriting.
In contrast, simplified underwriting is usually a quick online life insurance application that does not require a medical exam. You can often receive instantaneous life insurance coverage. Just be aware that the coverage amount may be limited as well as more expensive with simplified underwriting.
WHAT HAPPENS IF I’M DENIED?
Good news: There are options if you’re initially denied life insurance. The first is to contact the company that denied you to see if there was a mistake on the life insurance application. If there was no mistake, find out the reason for the denial. Once you know, you can try working with an insurance agent that specializes in higher-risk applicants.