Life insurance covers virtually any type of living expense. Some common expenses include:

Immediate Expenses

Funeral and burial costs
Uncovered medical expenses
Mortgage or rent
Car loans
Credit card debt
Taxes
Estate settlement costs

Ongoing Expenses

Food
Housing
Utilities
Transportation
Health care and insurance
Continue a family business

Future Expenses

College costs
Retirement

Truth be told, not everyone needs it. This question can best be answered by asking yourself a secondary question: “Would someone I care for and love suffer financially if I were to pass away.” The answer to that very personal question should propel you to action in one way or another.

As we’ve discussed, all life insurance policies are different. Yet regardless of the one you get, it’s job is the same across the board: pay cash to your loved ones lest something happen to you.

Married/Partnered People: When a spouse is left behind, it can be extremely difficult to cope with the loss of their loved one, but also grapple with the financial burdens of every-day life if their spouse was the main breadwinner. Life insurance can bring a sort of stability in the unforeseen times of loss.

Parents: Life insurance is for stay-at-home parents as well as working parents and even single parents. No matter what you do for your family, the sacrifices you make to provide for your children, and the long hours you put in, having a safety net to keep them financially protected is more than worth it.

Retirees: Surviving partners often must make do with less Social Security and pension support. They may also have unforeseen funeral costs to cover. This can seriously hamper their finances.

What’s more, if you’re planning on leaving money to heirs, they could be required to pay estate taxes of up to 45%. Life insurance, which is almost always exempt from federal taxes, can be immensely helpful in any of these situations.

Business Owners: Along with everyday life expenses that can be left for a family or spouse, businesses have their own set of financial challenges to keep afloat. Protect your family from those difficulties.

We’ll ask again— Life insurance: Do you need it? No. Do they need it? YES.

Living benefits of a life insurance policy let you access your life insurance proceeds before you die. This is typically done in the form of loans from your cash value account (if you have a permanent life insurance policy and cash accumulation.

In the case of terminal illness or illness, both term and permanent life insurance will allow 50 – 75% of the death benefit to be paid out in advance under an “accelerated death benefit rider”.  This is typically reserved for situations in which someone faces a terminal illness or injury.

Many people also  use cash from living benefits to get their family’s finances in order or to take a special trip.

There are two main types of life insurance: term life insurance and permanent life insurance.

Term Insurance

Term life insurance is the most popular type. It pays a cash benefit to your loved ones (also known as your beneficiaries) if you were to pass away during the term. The term is how long the policy lasts for:   Typically  10, 20 or even 30 years.

The advantages of term life insurance are:

• • Affordability. 

    Term life insurance only provides a death benefit, which is the cash paid to your beneficiaries  should insured pass away during the term of the policy.  It does not include a savings benefit like permanent life insurance does. This makes it the most economical type of life insurance policy, at least initially. Many people are pleasantly surprised to learn just how affordable term life insurance can be. As an example, a healthy 30-year-old can get a $250,000 20-year level term policy for about $13 a month.

  • Flexibility. 

    You get to choose how long you want coverage to last based on your needs. Many people select a benchmark  such as  when their kids graduate from college or when they retire.  The term you select can last as little as a year to as long as 30 years or more (some carriers even offer 40 year level term life).

  • Simplicity. 

    Getting term life insurance typically involves just two decisions: how much coverage you want and how long you want it to last for.   A licensed insurance professional can help you choose a coverage amount as well as term of years.  Please feel free to utilize our Life Insurance Needs Calculator to get a general idea of how much term life insurance you need.

  • You may not required to do a medical exam: 

    Most types of term life insurance policies require a medical exam:  This is part of the underwriting process.  Today, there are some insurance carriers that do not require you to undergo a medical exam. They typically ask a few qualifying medical questions If you meet their qualifying requirements, you can proceed to purchase the policy at the rate quoted.  However, the coverage amount may be limited as well as more expensive on a dollar-for-dollar basis than traditional life insurance that requires a medical exam.

In addition to a death benefit, permanent life insurance has several features that term life insurance does not.

The additional advantages of permanent life insurance include:

• Lifelong coverage. 

  As its name implies, permanent life insurance covers you for your entire life; and as such, you continue to pay for your insurance (premiums) until you pass away. Many people gain great peace of mind knowing they will always having coverage in place.

• Living benefits. 

  A benefit of permanent life insurance is that it builds cash value over time, which accumulates on a tax-deferred basis just like assets in most retirement and tuition savings plans. Once accumulated over time, this cash value money can be used for any purpose, including important milestones such as a down payment on a home, college tuition or even  retirement. (Be aware that withdrawing cash value from the policy will typically reduce the death benefit if you don’t pay it back.  There can also be an interest rate associated with the this money if utilized like a loan.)

• Many options. 

  There are different kinds of permanent life insurance and typically go by the name; whole life, universal life, paid-up life, variable live, etc…  Some offer a guaranteed rate of return while others let you choose a mix of investments for a variable rate of return. Meanwhile, some require you to pay fixed premiums while others let you vary the amount based on your financial circumstances. Others even let you skip premium payments and increase or decrease your coverage level over time.

You can’t afford to not have it. But what does that actually look like?

Because your life insurance policy is meant to suit your needs specifically, it’s hard to pinpoint an average cost. There are various factors that contribute to the price of your plan. Some of those things include: your age, your health, whether you smoke or not, your hobbies, your gender, the type of policy you buy (term or permanent) and your coverage level.

Do not think that poor health or more dangerous hobbies keep you from getting the coverage you need. Depending on what your specifics are, there is a policy for you! You may pay a bit more than someone who is younger or doesn’t skydive. But do not fear, there is a parachute (the right fit) for you and your loved ones. Be open and upfront with your insurance agent so that they can give you exactly what you need.

All in all though, life insurance costs less that you think.
In their most recent  Insurance Barometer Study a respected life advocacy organization revealed that people think life insurance costs three times more than it really does. Many people were surprised to learn that a healthy 30-year-old can get a $250,000 20-year level term policy for just $13 a month. With this policy, your loved ones would receive $250,000 if you were to pass away between the ages of 30 and 50. (And they’d receive the full $250,000, since life insurance proceeds almost always pass on tax free.)

A quick and easy way to get an idea of how much life insurance you’d need is to use our Life Insurance Needs Calculator. Simply answer a few questions to get an estimate of the amount you’d need to protect your nearest and dearest.

Keep in mind that if you are pinching pennies as it is already, any kind or amount of coverage is better than none. Do not let tight funds get in the way of what truly matters—your loved ones and their financial security. The earlier you can get your personal policy, the better because age is a determining factor for the appropriate price of insurance!
You can never plan for what is around the corner. Be ready for it with confidence that uncertainties of the future can be settled in smart investments of today.

Once you and your financial advisor determine what type of life insurance you need; you begin the application process which typically starts by completing out a life insurance application. From there, your application will undergo a process called underwriting.

Underwriters are trained experts that work for insurance companies.  They decide whether to offer you life insurance and at what cost.  Approval and costs are based on your risk class.

There are two types of underwriting:

• Traditional underwriting. With traditional underwriting, you fill out a life insurance application, undergo a medical exam. And an underwriter typically requests medical reports from any doctors your have seen in any given time period (This is called an “Attending Physicans Statement” (APS Report)
• Simplified underwriting. With simplified underwriting, you typically fill out a quick-form life insurance application. If your answers qualify under their guidelines,   a medical exam is not required.

Keep reading for more in-depth information about the traditional underwriting process and the pros and cons of both traditional and simplified underwriting.

The Traditional Underwriting Process

• • The application. You’ll usually fill out the life insurance application with help from your insurance professional. Your agent will then submit it to the insurer’s underwriting department. (Quick word of caution: Insurance fraud is a felony in every state, so be truthful when answering each question!)   While you wait, your agent may request a check for the first premium payment in order to “bind” your coverage. This gives you and your beneficiary provisional/ temporary coverage while you wait to hear back from the insurer.
  • The medical exam. Commonly referred to as the “paramedical exam,” the life insurance medical exam typically involves taking your vital signs, collecting blood and urine samples, and gathering information about you and your family’s medical history. Sometimes a treadmill test or EKG is required. All told, the exam should take less than 30 minutes. The insurer usually picks up the tab.
  • The review process.  Once all the information is given to the underwriter, he/she will carefully review your life insurance application and medical exam results. He or she will also consider several other factors like your driving record, hobbies, credit history, and more. It usually takes 3 – 6 weeks to find out if you’re offered coverage by the insurance company.

The Simplified Underwriting Process

• • The application.  You’ll answer a few health-related questions to see if you qualify for coverage and, based on your answers, you may be offered immediate life insurance coverage.
  • No medical exam. This part appeals to many people. There is no medical exam, no blood or urine sample, and no lag time waiting on test results, this appeals to many individuals.

Additional background. By signing the application and agreeing to the terms, you typically give the life insurance company permission to run your personal information through several databases, including the Medical Information Bureau and Drug Prescription Reporting Organizations. The databases may flag anything that looks out of the ordinary.