LIFE INSURANCE

Often stigmatized and misunderstood to varying degrees, life insurance is truly the most important product that my agency offers.  All it takes is a glance at the nightly news to witness the horror that befalls families around the world on a daily basis.  When tragedy strikes, life insurance allows a shattered family to grieve without experiencing the additional burden of financial ruin or reduced quality of life.  

Life Insurance At A Glance

While details and products vary from company to company, there are general types of policies that share characteristics regardless of what you call them. 

  • Term Life

    Available in varying lengths in years, often 10,20 and 30, term life at a general level is exactly what it sounds like:  For a predetermined term, the insured pays a premium in order to secure that a sum of money will be paid to a beneficiary should the insured die during that time frame.  For most term products, no equity is earned during the life of the policy, unless of course the insured were to pass away and a death benefit is awarded.  That is to say, at the end of the term, the life insurance coverage ends and your premium payments end.  To combat this policy lapse, some term products allow for ‘conversion’, which converts the term life into permanent life without requiring further proof of insurability.

  • Permanent Life

    While again available in many forms and functions, permanent life is a policy that is guaranteed to pay out upon death, as long as the necessary premiums are paid.  Some forms of this product also allow for a cash value to accrue from the premiums you pay, giving you living benefits as well.  There are also often opportunities for policy loans, where you can borrow money against the face value of the policy.

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Busted – Common Myths and Misconceptions Surrounding Life Insurance

There are plenty of things in life that should be debated: HBO or Netflix, is NASCAR a sport, cheese or pepperoni, and the quality of the How I Met Your Mother finale; the importance of life insurance shouldn’t be one of them. However, it’s estimated that there are approximately 15.3 trillion dollars worth of unmet life insurance needs in the United States, meaning many people are debating it, and life insurance is losing.

There are many myths and misconceptions surrounding life insurance. Whether it’s regarding the difficulty to obtain it, the perception that you won’t qualify, or that you just don’t need it, people are being deterred from purchasing a life insurance policy that could protect them and their family’s future well being.

So, without further adieu, let’s take a look at some of these common misconceptions about life insurance.

Myth #1: Senior citizens can’t get life insurance.

Busted: It’s true that life insurance costs increase as you get older. It’s not true that you can’t get insured once you become a senior. The perception that you are uninsurable as you enter your senior years is far from the truth. There are still many affordable rates that seniors can obtain. When insurance companies evaluate you for a policy, they determine the likelihood that you’ll cash in on your policy during its term. If you are healthy senior, your age won’t be as heavy of a factor as you’d be led to believe.

Myth #2: Life insurance is too expensive.

Busted: Approximately 80 percent of people over estimate the cost of life insurance. Millennials have been shown to over estimate life insurance expenses by 213 percent and Gen-Xers by 119 percent. Many people think that it will cost them around 1,000 dollars/year, when in reality it can cost as little as 150 dollars/year.

Myth #3: You’re better off saving or investing your money.

Busted: Life insurance is an investment. Though it might not present itself in the form of luxurious vacations or stock portfolios, it’s an investment in your future and your family’s future. Even if the benefits aren’t immediate, the money you’re putting in each month isn’t just getting thrown away; it’s helping you be more prepared for life’s curveballs.

Myth #4: Only the breadwinner needs life insurance.

Busted: Just because someone doesn’t bring home the largest check in the house, doesn’t mean his or her contributions aren’t valuable. A stay-at-home parent has a lot of responsibilities that keep the day-to-day activities on track that aren’t necessarily quantifiable in the form of a single check. If something were to happen to the “non-employed” or lower salaried parent, life insurance can help cover the costs of the jobs that they contributed to the household, including childcare and home maintenance.

Myth #5: You’re too young to be buying life insurance.

Busted: Being young is one of the best ways to save money on life insurance. Buying a plan as a healthy person at the age of 30 can cost you around 12 dollars per month, whereas that same policy can cost you 32 dollars per month if purchased at the age of 50. Additionally, more than just the worry of increased costs, there’s always a chance you won’t even be able to qualify for a policy after certain things happen later in life. Your insurability can change in the blink of an eye and is never higher than when you’re young and healthy. In three, five, or even10 years, there are plenty of things that can happen that could make getting life insurance less of a reality, which is when you will probably need it most. When you’re young and in good health, premiums will most likely be lower and insurability higher, saving you money in the long run.

Myth #6: You’re single and don’t have dependents, so you don’t need it.

Busted: Just because you don’t have anyone who directly depends on your income now, doesn’t mean you can’t plan for it now. Getting life insurance before these major life events can help lock in a lower rate. Additionally, funeral costs will be made the responsibility of your family (the average funeral costing thousands of dollars) and co-signed loans aren’t going away as they would become the responsibility of the co-signer.

Myth #7: The plan you have through your employer is sufficient.

Busted: Many times employer life insurance benefits provide a payout that is closer to one or two times your base salary. That base salary will typically not include commissions or bonuses either, which could impact the amount greatly. Generally, it is recommended for your life insurance policy payout to be somewhere between five and eight times (some experts even recommending 10-12 times) your annual salary. Additionally, if you leave your job, that employer benefit probably won’t be coming with you, leaving you vulnerable. Getting your own personal policy can help ensure you are protected and your family will be secure.

Life insurance is something you buy before you need it. Don’t let common misconceptions keep you from insuring yourself properly. By learning the facts and what fits best with your lifestyle, you can make an informed decision about your life insurance policy, and help prepare you and your loved ones for the future.

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The Importance of Life Insurance for Millennials

So, it turns out life insurance isn’t just for the elderly. Whether you’re planning to scale the Andes or binge another season of House of Cards, it’s pretty important for everyone to have it. However, less than 20% of millennials indicate that they would purchase life insurance. As a millennial, the feelings of being invincible and having all the time in the world are all too common; and much like the last piece of pizza, nobody wants to believe those feelings can ever disappear. But being prepared for the curveballs life may throw you can be beneficial in the long run. This is where life insurance comes into play. By insuring your life, you can help ensure the quality of your loved ones’ lives as well.

Common myths and misconceptions surrounding the purchase of life insurance

Too expensive: On average, for someone who is 35 and under and doesn’t smoke, term life insurance can cost less than 30 dollars per month to get 250,000 dollars worth of coverage. To put this into perspective, a month of life insurance can cost less than a movie date.

Options are limited: There are many different courses of action when deciding what life insurance policy you should get. Whether you’re thinking on a budget, within a certain time frame, or for the long-term, you have got yourself some options.

Not a priority: Sure, rent, groceries, and that Spotify subscription can seem like more immediate expenses to devote your money to. However, by incorporating life insurance into your monthly budget, you also plan for those more distant expenses to make sure your family won’t be stuck with unexpected costs, such as funeral arrangements and co-signed loans, if something were to happen to you.

Reasons you should get life insurance in your 20’s and 30’s

Lock in those low premiums: Just like good scotch, life insurance gets more expensive with age. When an insurance company develops a policy for an individual, they consider the likelihood that the person will file a claim and cash in on their policy before the term expires. As various medical conditions become more probable and health deteriorates along with age, your initial premium will increase along with that risk. Buying while you are young and healthy is a good way to plan for future insurance needs because monthly premiums will be lower. A monthly fee in your 20’s can cost less than 30 dollars per month; whereas a monthly fee in your 40’s will cost around 50 dollars per month, that’s almost a 100% increase in price over 20 years.

Those student loans aren’t going away: Well, it’s 2016 and with that comes crippling student loans. Most young people don’t have the credit to sign these loans on their own and will need someone to co-sign with them. In fact, the average student debt for millennials is around 30,000 dollars and continues to increase. If something were to happen to you, the responsibility to pay off these co-signed loans will fall upon the co-signer which can be financially debilitating.

Funerals are expensive: Funerals can range in price from 7,000 to 10,000 dollars. That’s about a year’s worth of groceries for a family of four. Even the casket alone can cost up to 2,000 dollars. Having life insurance can help alleviate these costs and eliminate the financial stress from the grieving process of loved ones.

You have dependents: If there is someone who depends on your income, whether it be a spouse, child or parent, having that income stripped away unexpectedly can be a shock and can seriously impact the day-to-day life of these dependents. For example, getting life insurance now can help make sure your kids will have financial assistance for college or your spouse will be able to pay your mortgage if an unexpected death were to occur.

You can choose the plan that’s best for you: There are two types of general plans, term and permanent plan life insurance. Term is a life insurance policy for a set time frame such as 10, 20 or 30 years. Permanent life insurance will cover you for your entire life as long as the premiums are paid. With a permanent policy, you can decide between whole, universal or variable, all of which change depending on how you want to invest your money and the flexibility you would like to have. Term policies tend to be seen as a better choice if you are on a tighter budget; whereas permanent policies are seen as more expensive but have a better return over a longer period of time.

Benefiting while you’re still alive: If you opt for a permanent plan, this can double as a savings account, providing you cash value while you are still alive. This can help keep your money safe and provide you with more financial security throughout your lifetime as well.

The bottom line: Getting insurance while in your 20’s and 30’s can help more than just yourself and prepare you for future expenses. By thinking about the long-term while you are healthy and young, you can help strengthen your loved ones’ financial security in unexpected circumstances and get more bang for your buck.

Curious about what kind of coverage you should get? Check out this calculator to discover the best plan for you.