Author’s note for COVID-19
The COVID-19 pandemic has caused families all over the US to review their life insurance and estate planning documents with greater urgency than ever before. Life insurance companies have responded by loosening underwriting requirements for in-person medical exams and have also significantly increased policy size limits for no-exam life insurance. For more information on how the pandemic has affected the life insurance industry worldwide, read our post here.
Why Is Life Insurance Important?
If you’re wondering, “Why is life insurance important?” keep reading.
When responding to a recent survey, 84 percent of Americans said that most people ought to own life insurance.
But, of all the survey respondents, only 59 percent had life insurance coverage.
There’s some disconnect happening here.
Some people might be going without life insurance because they think it’s too expensive.
Or, maybe they think that life insurance is essential for other people but not for them.
Does everyone need to buy life insurance, though?
The short answer is, “Yes, they do.”
Everything you need to know about the importance of life insurance is explained below, along with tips you should keep in mind when shopping for it.
Reasons to buy life insurance
There are a lot of reasons why you need to make life insurance a priority, whether you’re 25 or 52.
Here are some of the most significant benefits of purchasing a life insurance policy:
1. Pay Off Your Debts
Do you have any debt right now?
If you’re like 80 percent of Americans, you do. Maybe you have a mortgage, an auto loan (or two), or student loans.
Who would be responsible for paying off that debt should you pass away tomorrow?
Life insurance provides tax-free money for your loved ones to pay off your debts after you’ve passed away.
That way, they don’t have to deal with a financial burden on top of grieving your loss.
2. Supplement Spouse’s Income
What would happen to your family, from an economic standpoint, if you were to pass away?
Would they be able to maintain their current lifestyle without your salary?
Life insurance provides your spouse with additional money to fill in the gap left behind by the loss of your income.
3. Plan for Your Children’s Future
Life insurance also provides you with an opportunity to plan for your children’s future.
You’ll have peace of mind knowing that, if something happens to you, your children will be able to enjoy the same quality of life they currently do.
Your life insurance can also be used to help pay for future expenses, like a college education.
4. Cover Final Expenses
Life insurance allows you to cover the costs of your final expenses.
Final expenses typically insurance funeral costs. includes funeral planning.
Funerals and burials can be incredibly expensive.
Don’t leave your family to deal with the financial burden of paying for one. Make sure you have a life insurance policy that they can use to fund your funeral and burial in as low-stress way as possible.
5. Pay Estate Taxes
Finally, a life insurance policy provides your loved ones with money to cover the cost of estate taxes.
Estate taxes can be quite costly, especially if you have a substantial estate.
Having a life insurance policy in place will make it easier for your loved ones to pay these taxes.
They won’t need to dip into their retirement accounts or other savings accounts.
By doing the proper estate planning using life insurance, your family can even avoid selling assets at a loss to raise cash to pay Uncle Sam.
Myths and Facts About Life Insurance
There are a lot of reasons to invest in a life insurance policy. There are a lot of myths about life insurance that are holding people back from making a purchase, though. Let’s debunk those myths now!
1. Employer-Provided Life Insurance is Sufficient
You might think you’re good to go if you have term life insurance through work.
What happens if you lose your job, though?
Relying on a group insurance benefit is not wise long term planning.
Remember, too, that employer-provided life insurance is usually only worth one or two times your annual salary at most.
That’s probably not enough to cover your expenses and provide your family with the security they need.
2. It’s Too Expensive
Life insurance isn’t as expensive as most people think.
This is especially true if you purchase it when you’re young and in good health.
The industry research firm, LIMRA, estimates that over 70% of all consumers overestimate the cost of life insurance.
3. It’s Better to Invest the Money Elsewhere
It’s true that you could take the money you would spend on life insurance and invest it somewhere else. But, should you? You need to think about overall financial planning to see what kind of life insurance makes sense in your situation.
Life insurance is a substantial investment. Before you invest your money in a potentially risky venture, it’s best to make sure your loved ones are entirely secure. Their financial future depends on a solid foundation.
4. It’s Too Complicated
Life insurance might seem complicated at first. In reality, though, the process of signing up is pretty simple.
You could probably accomplish it in an afternoon, especially if you work with a broker or independent insurance agent who can explain the different types of life insurance and help you find the best policy for your needs.
5. I’m Disqualified Because of Health Problems
It’s true that life insurance may be more expensive for you if you have health problems. That doesn’t mean you’re disqualified altogether, though.
There are lots of plans designed for those who are older or suffer from chronic illnesses. Your broker can help you find a high-risk insurance company that provides you with the coverage you need whether you have the policy for 20 years or forever.
Tips for Shopping for Life Insurance
Are you convinced that you should buy life insurance?
If so, here are some guidelines to keep in mind:
- Get a medical exam before you apply — you’ll need to provide your latest medical records
- Choose a term policy (which expires after some time) instead of a whole life policy (which expires when you die or stop paying premiums) if you want to save money
- For a settlement option, consider an annuity payment instead of a lump sum — this means your loved ones will receive a portion of the money every year instead of all at once
- Purchase separate policies for each spouse
- Calculate your coverage needs based on your current financial goals
These tips will help to simplify the process of shopping for life insurance and help you get the best coverage for yourself and your loved ones. And for stay at home parents, don’t think that it’s not crucial for you to buy life insurance for yourself! Again, consult with a good, experienced life insurance broker to go over all of your options.
Shop for Life Insurance Today
Life insurance provides your loved ones with the money they need to maintain their lifestyle and cover any expenses left behind after you pass away. It also gives you peace of mind, and you can’t put a price on that!
Remember these guidelines — especially the shopping tips — as you begin your search for the right life insurance policy.
If you need help shopping for a life insurance policy, we can help.
Contact us at CB Acker Associates Insurance Services or request a free term insurance quote online today!