Most people don’t love talking about life insurance, perhaps because we don’t want to think about or talk about death. For that reason and others, there seems to be a lot of confusion surrounding this topic. In this blog, we want to clarify the misconceptions and give you 10 basic facts that you need to know.
Here’s What You Need to Know:
1. You CAN afford life insurance. According to a LiveScience statistic, people without life insurance think it is three times more expensive than it is! THREE times. The truth is, in most cases having a policy is cheaper than your monthly cable bill. If you are young and healthy you should be locking in an affordable permanent policy rate now! You should consider your options for layering term-life policy for extra protection.
Life insurance is very flexible and can meet so many needs. You just need an expert to walk you through your best options to meet your long-term goals. Instead of just assuming it is too expensive, you should get a quote and let one of the insurance experts at Henry Insurance Service give you the facts about affordable life insurance.
2. Life insurance is a contract, which is called a policy. This policy is a contract between a life insurance company and someone who has an interest in the life and livelihood of another person. An insurance company pools the premiums of policyholders and pays out claims (a death benefit) in the event of a death.
3. There are four roles in a life insurance policy. These roles are:
- Insurer: the insurance company responsible for paying out claims in the case of a death.
- The owner: responsible for premium payments to the insurance company.
- The insured: the person upon whose life the policy is based.
- The beneficiary: the person or other entity to receive the life insurance claim—or death benefit—in the case of the insured’s passing.
4. There are three basic categories of policies:
- Term life- this is the most simple, least expensive, and most widely applicable. With this type of insurance, a company bases the policy premium on the probability that the insured will die within a term (typically 10,20, or 30 years). This is a policy that is only intended to provide coverage for a specified period of time. This means that you can take out a policy for only the years that you need coverage while your loved ones are dependent upon you. This policy does not include an investment into a savings plan, so your monthly payments are much lower.
- Whole life Insurance is a type of cash-value life insurance, which is an investment for life. Part of purchasing a cash-value plan means that you are using your life insurance to fund a savings plan managed by the insurance provider. Put simply, there are two things to consider about Whole Life plans: you are making a permanent investment in your insurance & your plan will be more expensive because it is doubling as an investment account.
- Universal life was designed as a less expensive permanent life insurance alternative with added flexibility, but increased interest rate risk for the owner. Your life changes and so do your life insurance needs. Universal life (UL) insurance offers the flexibility to change your policy as your life changes. Marriage, children, job status and time can impact your life insurance needs. When premium requirements are met, a UL policy provides permanent life insurance protection with cash value accumulation.
5. You should revisit your life insurance policy throughout the stages of life. Contrary to popular belief, life insurance is not a one-time decision. Think of it more as a continuum that reflects your current situation throughout your stages of life. We recommend that you review your coverage every few years or when a significant life event happens.
6. If you have a life insurance policy through your employer, know that if you take a different job or get laid off by your employer, your policy will not go with you. This kind of policy offered through an employer is not portable, which can leave you without protection. When you get your own separate life insurance policy you are able to decide how long you will be covered. Plus with an individual policy you can customize your coverage better to fit your own needs.
7. Life insurance is vital for the bread winner of a single-income household. It does not apply a monetary value to someone’s life, but it helps compensate for financial consequences that result in the loss of life. It helps loved ones cover the costs of final expenses, debts, and lost income. It lessens the financial burdens at a time when family members are grieving, and it provides peace of mind for the policy holder.
8. Life insurance is also very important for singles and stay at home parents. If you’re single, or married with no children, you still may need life insurance to help loved ones pay your own debts (hello, student loans!) If something happens to you. If you stay home with the kids, consider the ways in which you serve your family and the costs it would take to replace these services. Child care, daily transportation, cooking, and home maintenance costs can really add up to tens of thousands of dollars a year. Life insurance can cover your end of life expenses, and cover theses costs.
9. Know the facts about cancelling an existing life insurance policy so you don’t lose money or coverage. If you find yourself wanting to cancel your policy or find that your policy no longer works for you, you have to be very careful about how you move forward. So, its important to do your research first. Talk to your insurance producer before you make a move!
10. It’s best to contact an expert to walk you through this process face-to-face. While there are many tools and online options to give you an estimate of how much a policy will cost, an insurance expert can actually help you save money by choosing the best carrier for your unique situation.