Life Insurance 101
A Whole New World...
If you’re new to the life insurance world, don’t fret! It’s easy to get overwhelmed by the confusing wording and overload of information out there. But the concept behind life insurance is simple: Life insurance can help your family keep the lifestyle they love and provide significant, long-lasting financial security, if anything unexpected were to happen to you. It’s the easiest way to plan ahead and protect the future that you and your family are building.
The Basics You'll Want To Know...
A life insurance policy is an agreed upon contract between you and an insurance company.
Within the contract, you agree to make payments – more commonly known as ‘premiums’ to the insurance company for a specified period of time. Depending on the type of policy you select, the period of time can range from 10, 20, 30 years or even the duration of your life. In the event that you pass away within the duration of your policy, the insurance company will provide a lump-sum cash payout (death benefit) to the person(s) or organization(s) that you’ve listed as your beneficiary (the recipient).
A life insurance policy is legally binding and government regulated.
A Life Insurance Policy Is Typically Made Of These Four Components...
- Policyholder: The person who owns the life insurance policy and pays the premiums.
- Premium: The money that the policyholder must pay monthly or annually to keep a policy active or “in-force” during the term. By paying your premium, this ensures the insurance company will provide your beneficiaries with the policy death benefit in the event of your passing. Opting to not pay your premium will result in your policy lapsing or becoming ineligible.
- Beneficiary: The person(s) and/or entity that receive the death benefit if a policyholder dies. You can name one or more person(s) or entities as beneficiaries when you purchase a policy.
- Death Benefit: The money paid out to the beneficiaries, if the insured person (policyholder) passes away. Death benefits are not subject to an income tax and the elected beneficiaries typically receive the benefit in one lump sum payment.
Here's Why You Should Consider Life Insurance...
One in three families will not be able to meet their day-to-day expenses within a month of the primary financial provider’s death.
Life insurance coverage can help ensure your family can maintain its lifestyle they love and long-lasting financial stability.
Those That Need Life Insurance Most...
Homeowners
If you’ve recently purchased a home, having a life insurance policy is a great option to help cover the expense of a mortgage. This will also help support any co-signers on your home, should you unexpectedly pass away.
Parents
Whether you work or stay at home with your children, you’re responsible for taking care of them – and their future well-being. Life insurance will provide financial stability and security to your children should something happen to you. In most cases, these policies provide the ability for children to cover the expenses of cost of living, education and more.
You're Married
If you’re married or have a domestic partner, life insurance can provide protection to the life you were building with your loved one. Not only can it help cover the costs of lost income, but it can also cover expenses such as credit card bills, rent, mortgages, student loans and car loans. Don’t leave your loved one in financial stress by not having a policy.
You're Single
In addition to protecting your family from inheriting any debt you may have, life insurance can also provide financial support to your loved ones that may rely on you. Consider buying life insurance while you’re young so that by the time you need it, you do not have to pay more due to your age.
Breadwinners
Your income helps keep your family afloat. Without it, there could be quite a financial burden to cover living expenses, tuition, debts, and other expenses that your income supported. Don’t jeopardize your loved ones lifestyle and financial stability, should you unexpectedly pass.
You Have Debt
Even if you’re single with no children, having a life insurance policy is a great idea if you carry debt. Not all student loans will be forgiven due to bankruptcy or death – life insurance coverage can help cover this so your family isn’t responsible for paying your financial debt.
Business Owners
Life insurance can help protect your business. It’s most commonly used to pay off debts or to keep your company afloat while they learn to adapt to growing the business without you.
You Want To Cover End Of Life Expenses
You can take out a small life insurance policy to ensure you’re covering the costs of end of life expenses such as funeral costs. That way, your family isn’t left with another burden of losing a loved one.
Deciding When To Get Life Insurance...
Life insurance becomes more expensive as you become older. The sooner you get a policy, the more financially affordable it will be! On average, policy premiums increase 8-12% each year you wait to take out a policy. By applying today, you can lock in a low rate for a term policy that’s guaranteed to not increase in price throughout the duration of your term period.
Understanding The Right Coverage For You...
Life insurance is different for every person.
Typically, you can find your ideal coverage range by calculating your long-term financial obligations and then subtracting your assets. The left-over or remainder is the gap that life insurance needs to fill.
There’s also a more straightforward manner to determine what you need. One general rule of thumb is to simply multiply your annual income by 10. You can also use the DIME formula (Debt, Income, Mortgage and Education) as a starting point to determine your life insurance coverage needs.
Finding The Right Term Length...
When you’re deciding the term length for your policy, keep in mind the following life events to help you choose:
Your Retirement
Your Mortgage Is Paid Off
You Reach Your Savings Goal
Your Children Are Grown And No Longer Dependents
What Does A Life Insurance Policy Cost?
Policy cost can vary based on numerous contributing factors, including the term length and the amount of coverage, in addition to your gender, age, health, and lifestyle. Some of these factors that contribute to the cost of your policy are within your control. For example, people that don’t smoke or use tobacco products traditionally pay substantially less for life insurance than those who do.
Another factor in lowering your cost is to select a shorter term length. Despite that, you shouldn’t automatically select a 10-year policy over a 20 or 30-year policy. Instead, find the right term length that will cover your family until your debts are paid off, you have enough retirement income, or your children are no longer financially dependent.
Depending on your needs and your background, policies can cost as little as $10 per month or upwards of $40 per month. We’re here to help you find the policy that meets your needs and is financially affordable for your budget!
Don’t Only Rely On Your Life Insurance Policy Through Work...
Having an employer sponsored life insurance plans is a great perk, but it might not provide enough coverage to protect your family. Employer policies typically offer coverage that’s 1-2x your annual salary. Although it’s helpful (and better than nothing), that money can dry up fast. In other words, most experts recommend coverage that’s 10x your annual salary, or the total amount of money your family would need to replace your income for years to come to cover the costs of living expenses, mortgage payments, student loans, child care, monthly bills and even funeral expenses.
Solely relying on your employer-sponsored plan puts you in a tricky spot when you leave the company, whether you’re changing jobs, laid off or retiring. When you leave your company, typically, you lose your life insurance coverage.
Most folks find that it’s more cost effective and protective to have an individual life insurance policy either in place of, or in addition to, your work policy. So don’t get caught without it – especially if your family relies on it, should something happen to you!
Where To Get Your Life Insurance Policy...
Look no further! Life Legacy offers highly customized life insurance policies that meet your needs for the best price. Whether you’d like a traditional policy for your loved ones, a hybrid policy that goes to your loved ones and a nonprofit or a solely charitable policy (legacy giving) – we’ve got you covered…literally!
