If there’s one thing we know about people, it’s that they love to shop. But one thing most people dread purchasing is life insurance.
There’s just something dismal about planning the financial aspects of your death. Then on the flip side, you want your family to be alright after you pass. With life insurance, you can ensure your funeral costs are taken care of. Plus, a life insurance death benefit would provide your loved ones with extra cushion to cover other expenses.
Having this type of coverage is the sensible and responsible thing to do. It’s likely younger people are starting to purchase it. About 70% of millennials today have a life insurance policy (group, individual or both).
This is 10 percentage points more than in 2010. Plus, the number of millennials with individual life insurance increased by a whopping 48%. There appears to be a growing urgency for life insurance coverage.
Even those with lower incomes are investing in them. About 40% of people making $50,000 or less have life insurance.
If you’re not convinced life insurance is important to buy now, then continue reading.
The Loved Ones Who Rely On You May Suffer
Your potential death will already cause a heavy burden on your spouse and/or children. Throw on top of that financial obligations, like funeral costs, mortgage payments/rent, car notes, health insurance, and other debts.
Dealing with the financial stresses at a time like this isn’t healthy. A life insurance death benefit can put to rest these issues, allowing your family to cope and heal.
You can name the beneficiary as your sibling, business partner, employer, ex-spouse, or whomever else relies on you financially.
There’s no amount of a life insurance death benefit that can replace you. But it can help to ease the burdens you’ll leave behind. Outstanding debts, future college expenses for your children and other obligations you’d otherwise have still need to be taken care of.
Life Insurance Policies Are Contracts
When you purchase a life insurance policy, you’re entering into a contract. The contract is between the insurer and an individual who has a financial interest in the life of someone else. You’ll oftentimes see employers take out coverage on their employees.
So it doesn’t have to be the person passing away who has to purchase a policy. The money used for the life insurance death benefit comes from the premium payments made by all of an insurer’s policyholders.
Life Insurance is About Risk Management
So don’t view it as an investment. Although life insurance isn’t taxable, it isn’t really an optimal investment. However, if you haven’t paid off your mortgage, college debts or maxed out your Roth IRA or 401(k), then life insurance is ideal for risk management.
It’s a backup plan your family and business partners can fall back on in the event of your early demise.
Term vs. Permanent Life Insurance
You have two choices – term life and permanent life. As you would imagine, term policies offer coverage for a specified amount of time. For instance, you can purchase coverage that lasts 5, 10, 20 or 30 years.
At the end of each term, you renew the policy for an additional chosen term. You can increase or decrease the term length at each renewal. The premium doesn’t change throughout the length of your term.
On the other hand, permanent coverage lasts until the day you pass away or cancel your policy. There are pros and cons to this option. If you can lock in a low premium rate early on, you will pay this forever. However, if you get a high premium at the onset, you’re stuck with this.
You can select between variable life, universal life, and whole life policies. The original is whole life insurance, which is similar to investing in CDs and bonds. Variable life comes with investment options similar to mutual funds.
Then there’s universal life, which was created as an affordable and flexible option. But with it comes a higher interest rate risk.
The Sooner You Get Insured the Better
Obviously, you want to obtain a life insurance death benefit when you’re young and healthy. This is when the rates are much lower. The rates vary based on the year, company and your age.
However, you can generally expect to pay less than $500 annually for a 20-year term, if you’re a 30-something male non-smoker. For a permanent insurance policy, you can expect to pay 10 to 20 times more.
This is why shopping around for quotes is essential.
When You Become Totally Disabled
What happens if you don’t die, but instead are rendered completely disabled? You’re no longer able to work and provide for yourself and family. You can obtain coverage that will pay out your benefit under these circumstances.
But to get this, you need coverage with the right bells and whistles. For instance, you should get the disability income rider. This will ensure you continue to get paid your regular salary once you’re deemed totally disabled.
Make sure you see how long the benefits will last. Is it for a few years or for the duration of your disability? Also, note that some insurers will only offer this if you were disabled by an accident or sickness.
You should also consider the waiver of premium rider. This will protect you from owing premiums to the insurer if you were to become totally disabled. Some companies expire this waiver once you hit 60 or 65 years old.
When You’re Health is Declining
It’s almost inevitable – you’re going to grow older and less healthy. When this happens, you need to ensure you’re properly covered. With the guaranteed insurability rider, you can buy extra coverage later on without a medical exam. You also don’t have to prove your insurability.
So if you end up sick, you can beef up your life insurance death benefit before something happens. Some policies will only allow you to purchase additional coverage in intervals. For example, every three years or once you reach certain ages.
Even if you have cancer or heart disease, you can use this rider to buy additional benefits.
What About Converting from Term to Permanent?
It kind of makes sense to purchase a term life insurance death benefit when you’re younger. Then as you grow older, switch to a permanent policy. The beauty of this is you can lock in a premium before you get too old. However, expect to pay more for permanent than you do for a term.
Then as you grow older, switch to a permanent policy. The beauty of this is you can lock in a premium before you get too old. However, expect to pay more for permanent than you do for a term.
The older you get, the higher your premium will rise. With the term conversion rider, you can take advantage of this. No medical exam is needed to transfer policies.
There is a deadline for converting from one to the other without undergoing a health evaluation. Make sure to read the fine print to determine the convertibility features of your term policy.
When You Become Terminally Ill
The accelerated death benefit rider has become somewhat a standard in policies today. You can find it provided for free or at a low price. With this rider, you can cash out a portion of your life insurance death benefit if you become seriously sick. And if you’re life expectancy is short (like one year).
Read the policy to determine how much of your life insurance death benefit you can cash out before you pass away. Some insurers cap it around $250,000 to $500,000.
The purpose of this rider is to allow the insured to pay for medical bills and living expenses. There is the potential of you being charged a fee for exercising this rider (even if it’s offered for free).
Another option is the critical illness rider. If you’ve been diagnosed with a critical illness listed by your policy (i.e. cancer, kidney failure, stroke, etc), you can get a lump sum payment.
Rather than reimbursing you for medical expenses, this can be used to pay for other living costs.
Dying from an Accident
Accidents happen unexpectedly. If your life insurance death benefit doesn’t cover this, then your family is out of luck. One way around this is with the accidental death benefit rider. This allows you to get additional money on top of your death benefit if you die from an accident.
Another name for it is a double indemnity since the payout typically equals the same as the original benefit. There’s also the option of getting paid when you’re dismembered.
So if you end up losing your eyesight or a limb, you can file a claim for payment.
What if You Outlive Your Policy?
If you’re great with making timely payments, and your policy says it, you may be eligible to get all your money back. This is available for the return of premium rider.
Expect to pay more money for the premium, which is worth it if you lead a healthy, safe lifestyle.
Shopping for a Life Insurance Death Benefit
It doesn’t matter your age. Owning life insurance is important because you never know when you’re going to pass away. In America, 16% of millennials and 22% of Gen X own individual life insurance policies.
The older the generation, the higher the percentage of life insurance ownership. But rather than waiting until you’re old to get it, why not secure your family now? Even if you’re not married with children, your parents and others responsible for your debts will need coverage.
At Top Quote Life Insurance, you can find estimates for insurance policies from various companies. You can shop around for term life and permanent life policies. And there’s no medical exam necessary.
Stop by our website today to start generating free quotes for life insurance death benefits!