There’s an old saying that with the stroke of a pen we have the ability to affect generations upon generations of lives.
That’s definitely the case with life insurance.
You can buy all kinds of tangible things in this world – new clothing, new cars, new homes. While life insurance is intangible – you won’t have that new car smell when you walk away – its value is immeasurable.
Life insurance is put in place to do any number of things, from providing your survivors income and income replacement, leaving the means to pay off debts or mortgages, providing plans for business expenses or transferring wealth to charitable endeavors.
Ten years ago, Congress signed a bill making September Life Insurance Awareness Month as a way to encourage people to assess their insurance needs, engage professionals for insurance planning and ensure their loved ones are taken care of in the event of their own death.
Life insurance has a renewed spotlight due to the COVID-19 pandemic, but Deloitte recently reported that while the pandemic forced people to confront their own mortality, many Americans still don’t have life insurance or if they do, they are underinsured.
So many people understand they probably need life insurance, but they just don’t know enough about it or not enough people are talking about it. As a result, only about 52 percent of Americans own life insurance, according to Statista.
Since it’s Life Insurance Awareness Month, we’re going to talk about life insurance – what keeps people from purchasing life insurance, the different types of life insurance and the steps to take when you are ready to make a life insurance purchase.
The biggest misconception consumers have about life insurance is the cost. Most people estimate the cost of life insurance as being very expensive, but in reality, their estimation is around triple the amount it actually costs.
LIMRA reports that 44 percent of millennials estimate that a 20-year term-life insurance policy for a healthy 30-something costs $1,000, but it actually costs only $165 per year. When you look at an example, buying a cup of coffee a day costs more than a life insurance policy for most people.
Another misconception that people have is that life insurance is hard to get. But there are many different resources and different professionals out there who could provide you coverage from different carriers. It’s very accessible.
Lastly, people think it’s intrusive and daunting because of the medical underwriting. There are many different types of life insurance out there, some more intrusive than others. For example, it would be more intrusive for you if you’re buying a $10 million policy, because you have to make sure you’re healthy and have the financial justification. Most Americans don’t need $10 million of life insurance, but a $1 million policy can be affordable and easy to qualify for.
Statista reports that another misconception consumers have about life insurance is that beneficiaries have to pay income taxes on death benefits, which is not so.
Different Types of Life Insurance
The question you’ll likely explore with your financial advisor and insurance professional is whether to get term or permanent life insurance.
Term policies put protection in place for a set time period which you need protection. For example, a policy to pay off your mortgage. That is an example of a finite amount of time or “term” that you need coverage until the mortgage is paid down. Term life insurance often covers periods of 10, 15, 20 or 30 years.
You’ll likely pick a permanent policy if your need is longer than just one specific period of time. You can choose among whole life, universal life, indexed universal life, variable life and variable universal life.
Permanent life is a bit more expensive due to the fact that it’s permanent – it offers level, steady protection for the lifetime of the contract so long as you continue to pay the premiums. First you choose the face amount and you’ll pay a guaranteed premium for the life of the policy.
Getting Life Insurance
Getting life insurance is relatively simple.
The first step is to contact your financial advisor and have a conversation about insurance coverage. You might review the coverage you already have in place, estimate whether you have enough or too much. Then together you’ll do a needs analysis to understand whether you have the right amount of coverage for your needs and your family.
From there, you’ll decide what the next steps would be. If it’s determined that you need more, you’ll get a quote for what you need. Then fill out an application and it’s a pretty straightforward underwriting process from there.
There are two types of underwriting – full and simplified issue. With the former, you are subject to a medical exam, but not for the latter.
While there are various online tools available to compare quotes and apply online, I tend to learn toward working with an insurance professional so that you get that unbiased advice. Professionals can dive into selecting a quote and ensuring you have the right amount of coverage, versus over or underinsuring yourself.
Life insurance has never been more important than it is now, especially since we are still in the midst of a global pandemic that’s claimed millions of lives.
It’s a downfall of us in the profession that there are statistics that say more people are likely to purchase life insurance, yet, as stated above, only 52 percent of Americans own life insurance.
In addition to the practical reasons behind purchasing life insurance, there is an emotional piece to it. Life insurance is about taking care of someone you love. It’s really the ultimate gift you can give people you care about.
Life insurance is not just a transaction, it’s a selfless act.
About Christina Hester Snyder
Christina is an associate partner and wealth advisor at Jacob William Advisory with a storied 20-plus year career in financial services. Christina is known for her commitment to her clients and is dedicated to helping them alleviate their financial fears through education and planning that goes far beyond investments. She believes in a comprehensive approach that addresses all facets of planning, including wealth transfer, insurance, taxes, investments, estate and trust planning, retirement, risk management, and business planning. Christina graduated from the University of Baltimore with a Bachelor of Science in Business with an emphasis in international business. She also holds many professional designations, including CERTIFIED FINANCIAL PLANNER™ (CFP®), Chartered Financial Consultant® (ChFC®), Retirement Income Certified Professional® (RIPC®), and Certified IRA Services Professional (CISP™). She is an active member of her community and is involved in many professional and nonprofit groups, including acting as the president of the Maryland chapter of Women in Insurance & Financial Services and serving on the board of a nonprofit that helps Maryland families with financial hardships. To learn more about Christina, please click here.
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