Do you know that 40% of Americans do not have life insurance?
That’s a scary statistic.
This means that 40% of Americans will experiences financial hardships in the event of a death or disability in the family.
Despite this, people still prefer to spend more on conveniences such as takeaway, useless gadgets and Netflix.
Most people see life insurance as an inconvenient requirement by federal law or a nuisance sold by life insurance agents. They never consider buying life insurance until a major change in their lives happen: like getting married, having children, or reaching old age.
This mindset should stop. Financial security should be one of your foremost priorities in life especially if it involves your loved ones. If you ever choose to buy life insurance, we are here to lessen the difficulty behind the decision-making and help you choose what type of insurance you should get.
How much life insurance should I buy?
If you find yourself asking “Should I buy Life Insurance?”, then congratulations! You’ve finally taken a step toward securing your financial future.
But if you’re still worried on the additional expenses you’ll have to incur on life insurance premiums, know that we’re here to arm you with knowledge on the right one to choose.
So how much life insurance should I buy then?
The life insurance policy that you can buy ultimately comes down to your capacity to pay, your source of income, and other factors such as your age, health condition and lifestyle. Each insurance company offers different monthly premiums based on their policies.
Term Life Insurance policies are also known as “pure” life insurance because they cover death benefits only. In the event of the policyholder’s death, the declared beneficiaries receive either a lump sum, monthly payments, or annuity. Term Life insurance covers only a certain period and expires after a number of years. The beneficiaries can claim the benefits if the policyholder dies within the given term but only after a certain waiting period (usually 90 days after buying the package).
On the other hand, Whole Life Insurance not only comes with death benefits, it also has a cash value that builds up every time you pay the premiums monthly or annually. A huge part of the premiums goes directly to the cash value’s funds in the first few years of the policy and the rest maintains the death benefit. Unlike Life Term policies that expire after a declared number of years, Whole Life Insurance can keep you covered as long as you pay the premiums regularly. The beneficiaries will also get either a lumps sum or monthly benefits in the event of the policyholder’s death, but are generally larger compared with Term Life Insurance benefits due to the accumulated cash value.
Since I get more money from a whole life insurance, should I buy whole life insurance and forget the rest?
Don’t jump the gun yet. There’s a reason why we have different types of insurance policies. Although the main goal of life insurance is to set aside a sum of money that you can leave behind for your loved ones to use, you still need to choose wisely if a policy fits your purpose and budget.
Between the two, term life insurance are cheaper because they do not come with anything extra other than death benefits. As an example, a 10 year, $100,000 policy for a healthy, 30 to 40 year old people costs around $7 to $8 only. Whole life insurance can cost 4 times more than a Term Life policy because of the “no expiration” feature and may change in value over time.
When should I buy life Insurance?
To answer this question, the ideal time to buy life insurance is right after you are born. Buying life insurance for a newborn might seem absurd but to reiterate the point: the best time to buy insurance is NOW. Life insurance policy premiums are completely dependent on age. As each year passes, a policy becomes more and more expensive and in fact, most companies impose an age limit on who can buy their life insurance packages.
To drive the point on the importance of buying Life Insurance early, below are the national average prices of Term Life Insurance monthly premiums from ages 30 to 80, showing a $100,000 package with a 10-year term.
10 Year Term for a Male
10 Year Term for a Female
As you can see, insurance companies give higher rates to smokers because of the obvious health risks. Your height, weight, lifestyle, and medical condition directly affect your risk of death and influence the cost of your life insurance. This is the reason why most life insurance companies conduct medical exams before they offer you a package.
Aside from age and health, consider the factors below when asking yourself on “What kind of insurance should I buy?”.
Statistics say that women have longer life expectancies compared to men and therefore, pay lower insurance rates.
2. Family History
Even if you feel that you are at the peak of your health, you might end up with higher monthly rates if you family history reveals that any of your family members suffered from diabetes, heart disease or stroke.
Insurance companies are wary of clients who work in fields that are prone to high-risk situations and deaths, such as law enforcement, field construction, or the military. If you work in dangerous environments, you might need to shell out more money for your insurance.
Why should I buy life insurance?
All the reasons to buy life insurance boil down to one thing: financial security. Your unforeseen death can cripple your family’s income flow and cause numerous financial problems to those who rely on you. With the benefit claims from a life insurance policy, your family can continue paying their monthly mortgages, utility bills, and daily expenses even without you.
Other reasons from buying a life insurance include:
To cover funeral expenses
Funeral and burial costs can run up to thousands of dollars. Your family already suffers emotionally from the loss of a loved one. If you are the family’s sole source of incomelife insurance should be purchased if you want to spare your them from financial suffering.
To pay off debts
In case of your death, you need life insurance to make sure that your family can pay off your unsettled debts such as unpaid credit card bills and mortgages.
To pay for children’s expenses
If you are a father, purchasing life insurance can help you cover your children’s expenses and let them continue studying in college in case of your death.
To pay off estate taxes
Estate taxes can eat a huge chunk off a retirement nest egg. Most large estates buy whole life insurance to pay off estate taxes in case of death, leaving assets and retirement trust funds untouched for beneficiaries.
Setting aside a small amount of money for life insurance provides peace of mind for you and your family. Choosing the right life insurance package can be a daunting task without the proper knowledge and professional help. Independent life insurance agents can help you compare premium rates from different companies and decide on the best quotes based on your budget.