For many of us, our first exposure to the concept of insurance came when we got our driver’s license and learned we needed insurance in order to drive. Many of us learned a dual lesson in responsibility when our parents made us pay for it! Relatively speaking, car insurance is straightforward: we pay our premiums and if something happens that is covered under the policy, the insurance company pays for it after we pay the deductible. If we have a moving violation or an accident, our premium rates may go up.
However, many of us remained blissfully unaware of life insurance until a bit later. Some people’s introduction to life insurance may be when they get their first “real” job and their employer makes life insurance coverage available to them. Those who aren’t knowledgeable about what life insurance is and what it can do may opt out of the opportunity to purchase it through their employer, choosing to pocket the money or use it for more immediate needs. If only they knew …
What is life insurance?
Two of the most common types of life insurance are whole life and term life. Term life insurance is designed to help provide financial protection for a specific period of time; for example, 10 or 20 years. Whole life insurance is designed to provide lifetime coverage — you pay the premiums for as long as you live. Both can play a role in helping to provide for the four most common needs a family may face upon the death of a breadwinner:
Final Expenses
Helps cover funeral and burial costs to be sure, but may also help pay outstanding debts such as medical expenses or other debts the deceased may have accrued.
Income Replacement
When a breadwinner is no longer there, families may struggle finding a way to meet ongoing expenses the deceased handled
Mortgage
Arguably, the largest single expense (and asset) most families have.
Education
Helps cover the high cost of providing the children with a quality education.
Who needs life insurance?
The short answer is that anyone who has loved ones who are financially dependent on them, or has people whose financial status could be affected adversely if they were no longer here, should consider purchasing life insurance. Life insurance can be considered an integral part of the foundation of a long-term financial plan.
Many young people, particularly millennials, don't feel as though they have anyone to protect financially if they're not married or don’t have children, but that’s not the reason they cite most often for not buying. The top reason they give for not buying is the idea that life insurance is something they really cannot afford.1 Most Americans of any age overestimate the cost of life insurance coverage, though the problem is more pronounced and more widespread among younger adults — 44% of millennials think the cost of life insurance is more than five times what it actually is.2
The cost of life insurance is based primarily on two factors: your age and the state of your health. That means there is no time better than the present to buy life insurance. None of us are getting any younger and our health today does not guarantee what it may be in the future. Beyond that, none of us is guaranteed tomorrow. Most people would not purposely want to leave their loved ones in a position of financial uncertainty. Procrastination is counterproductive when it comes to buying life insurance to protect the ones you love.
How do I buy life insurance?
Because many people don’t feel knowledgeable about the various types of life insurance, they may feel overwhelmed by the thought of trying to decide the best coverage for their needs. Six in 10 life insurance shoppers use social media to learn about products and services and read reviews on financial professionals.3 Almost half of consumers of all ages (45 percent) go online to find more information on life insurance, but complete the purchase with an agent or financial advisor.4 You don’t have to be an expert on life insurance yourself; a licensed insurance professional can help you choose products that best suit your needs and budget.
Life insurance is for the living, not for the person who buys it. It exists to help protect your loved ones from financial uncertainty when you aren’t there. As part of a long-term financial plan, life insurance can be there for them when they need it most.
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Lewis & Ellis, Are Young People Still Going Without Life Insurance? (July 7, 2020)
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Life Happens, The True Cost of Life Insurance (July 7, 2020)
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LIMRA, Facts About Life 2019 (July 13, 2020)
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Insurance Information Institute, Facts + Statistics: Life Insurance (July 13, 2020)
Categories: Insurance, Life Insurance, Term Life Insurance, whole life insurance