Life insurance can provide a pillar of security for anyone’s financial plan. However, you may be one of the 65% of uninsured people who don’t invest in protection because they don’t know what type of life insurance policy to buy or how to purchase term life insurance to protect their family’s future.
Exploring the key reasons for investing in a life insurance policy can empower you to choose the kind of life insurance and options you will be happy with. You’ll be able to communicate clearly and make the best decisions when you speak with a life insurance agent.
Take a quick, deep dive into the differences between the two major types of life insurance and learn why term life insurance is the easiest, most relatively inexpensive way to get started.
What is term life insurance, and how does it work? It’s critical to have a good understanding of term life insurance because your knowledge will save you money while bringing peace of mind. You’ll have the insurance policy that’s right for you at an affordable price.
Life insurance can help your beneficiaries have the needed funds, so you won’t have to worry about where the money will come from to pay the bills if your family is left without your income.
When you’re armed with accurate information, you can easily sort through the many options, make an informed decision, and choose the type of life insurance plan best suited for you. Any misconceptions you may have will disappear.
Life insurance can be a confusing topic filled with unfamiliar choices, which often causes people to put off learning about it and investing in coverage.
However, the sooner you inform yourself to dispel misconceptions and take action to lock in a policy, the lower your monthly payments may be throughout the years to come. This is because the monthly premiums you pay for coverage increase every year you wait. The younger you are when you get life insurance, the less expensive a life insurance policy may be.
Have you heard any of the below common misconceptions about life insurance?
Unfortunately, two-thirds of younger people believe life insurance costs are prohibitive. One-third believe that they need to pay over $1000 monthly. Actually, healthy young women can have term life insurance for under $20 monthly. Even healthy 70-year-old men can get coverage for under $100 a month.
Taking advantage of group insurance rates through your employer is wise because premiums are often free or very low, and they come directly out of your paycheck. However, there are several factors to be aware of.
In today’s world of instant communication, you no longer have to visit a life insurance agent and a medical care practitioner and then wait weeks for underwriting. Now, you can shop online or by phone and get covered almost instantly. These tips will guide you through the process.
Savings are important. However, there are two problems with relying on savings to protect your family. First, it’s nearly impossible to save enough to cover all family expenses for years. Second, what is your family going to do if you depart during the years it takes to build up savings?
With term life insurance, coverage begins immediately. In exchange for a relatively small amount each month, your family can have access to the necessary funds if an unexpected event occurs. For example, a healthy 30-year-old woman can have $250,000 of coverage with a 10-year term policy for only $15.01 a month.
Understanding what term life insurance is — and why life insurance is so important — is vital for financial planning to protect your loved ones’ future.
How does term life insurance work? Life insurance supports your family after you die by paying out death benefits to your partner, children, or aging parents. While there are two popular types of life insurance — whole life insurance and term life insurance — the definition and purpose of both are the same.
When you purchase life insurance, the life insurance company agrees to pay the person(s) of your choice the agreed-upon amount if you die while you are covered. This amount is called a death benefit.
You choose the amount of the death benefit for both whole life and term life insurance policies. The death benefit can typically be up to 2 million dollars. The larger the death benefit is, the higher your monthly premiums will be.
Both types of life insurance provide peace of mind to the policyholder by guaranteeing financial protection for loved ones as long as you pay the premiums. In the event of your untimely death, your dependents will have the funds they need to cover:
The death benefit payout can also keep your small business going through a transitional period or fund education for your children. Determining the appropriate death benefit is crucial. You must know how much coverage adequately supports your family’s needs in the event of your absence.
The main difference between whole life insurance and term life insurance is that whole life insurance policies cover your entire life, whereas, with term life insurance policies, you choose a coverage period of 10, 15, 20, or 30 years. Once the policy term expires, the policyholder cannot access cash value or savings.
The other important differences between whole life and term life insurance are outlined below.
How do term life insurance policies work? Although term insurance does not accrue value, it does have several significant benefits that make it the most popular type of life insurance.
The value of term life insurance lies in having affordable protection for the duration of a mortgage, repaying student loans, or raising children.
Whole life insurance is the most popular type of permanent life insurance because it’s the simplest and most predictable. The cash value grows at a fixed rate, and premiums remain the same throughout your life. However, you pay higher premiums for permanent life insurance policies as compared to term life because:
A medical exam is usually required for whole life insurance — but not at Fidelity Life.
It is also important to throw light on universal life insurance. This is a form of permanent life policy that provides flexibility in both premium payments and death benefits. Unlike whole life insurance, which comes with fixed premiums and death benefits, universal life insurance policies permit policyholders to modify their premiums and death benefits according to their changing financial needs and circumstances. This adaptability makes universal life insurance a dynamic financial instrument that can adjust to evolving situations.
Similar to whole life insurance, a portion of the premiums paid into a universal life insurance policy is allocated to a cash value account, which accumulates over time on a tax-deferred basis. Policyholders can access this cash value through policy loans or withdrawals, offering a source of funds for various financial needs such as supplementing retirement income or covering unexpected expenses.
How does term life insurance work? The most popular life insurance is term life because it’s flexible, affordable, dependable, and simple. It’s usually the best place for hard-working families to get started on protecting their income. You choose the term length and coverage amount that works for you.
Qualify quickly with Fidelity Life’s RAPIDecision® term life offerings, including RAPIDecision® Life and RAPIDecision® Senior Term.
You’ll have guaranteed protection and level premiums throughout your term length. Our hassle-free process can get you protected in days instead of months.
It’s easy to understand term life insurance. As long as you pay the premiums, your family can receive a tax-free benefit if you pass away unexpectedly during the policy’s term.
Most people overestimate the cost of life insurance by 300%, according to a recent LIMRA study. The truth is that a healthy 30-year-old woman can have $250,000 in coverage for only $15.01 monthly.
Term life insurance costs do vary depending on your individual profile. Some factors that can influence the cost of your policy are:
There are a range of affordable Fidelity Life products to choose from based on your situation and financial responsibilities.
You choose the amount of coverage you need and who will receive the payout.
Although the DIME method requires the most work, it gives you more precise information.
Exploring the key reasons to buy life insurance may help you decide on the coverage amount you’ll need and how to structure the payout to protect your beneficiaries.
The key reasons for buying life insurance may change as you go through life’s stages. How does term insurance work in different scenarios? As a student, you might want to be sure your student loans are repaid. While raising a family, you’ll want to ease any financial stress losing your income might cause dependents.
You may also need to protect your family home and provide for educational expenses. Later in life, safeguarding any small business you’ve built and paying end-of-life medical and funeral expenses becomes critical. And let’s not forget leaving a legacy for future generations.
A Forbes Advisory survey found that 61% of respondents are concerned about their debt levels. An insurance payout can give survivors funds to clear debts and make mortgage payments for an extended period.
The ease of the policy’s claims-paying ability allows survivors to continue to live the lifestyle they’ve become accustomed to without struggling under the financial burden that losing an income could cause.
A recent survey revealed that 72% of parents have concerns about their family’s ability to pay monthly expenses if they pass away. Keeping the lights on and food in the fridge shouldn’t be a worry if a breadwinner passes away.
Life insurance beneficiaries typically receive payouts about 30 days after the principal beneficiary files the paperwork, which includes a copy of the insurance agreement and the death certificate.
Rapid life insurance payouts enable the family to make timely mortgage payments and settle any outstanding debts quickly. You can make sure your family’s financial future will be secure as long as you pay premiums.
Policyholders can add to their base policy to customize coverage according to their specific needs. Some common life insurance riders include Accelerated Death Benefit Rider, which allows policyholders to access a portion of their death benefit if they are diagnosed with a terminal illness, and Accidental Death Benefit Rider, which provides an additional death benefit if the policyholder dies as a result of an accident.
Co-signers are legally responsible for paying a debt if the primary borrower dies. Life insurance can provide a lump sum payment to the co-signer or the lender to cover the debt when you name them as the beneficiary.
You can create a trust that all or a portion of your life insurance settlement will be paid into for your children’s education. The funds will be there when they are needed.
Soaring costs of college education
University tuition and fees are rising at about 4% annually. Average public in-state costs are $10,662 per year. The average price for a private university is $42,162 for the 2023-2024 academic year. Then you must add on student living expenses.
Planning and funding educational dreams
Ensuring your children’s educational dreams become reality will have an immense impact throughout their lifetime. Average earnings for 4-year degree holders are 84% higher than for high school graduates.
Term life insurance can help you plan and fund your children’s education. The policy’s death benefit provides a lump sum to support an educational trust in case of your passing. Permanent life insurance policies can be a savings tool to accumulate funds for future education expenses, like tuition fees, books, and living costs.
Medical expenses are often much more significant than expected for end-of-life care. Health insurance may not cover everything. Also, funeral expenses are rising yearly, and you may have credit card debt. Burial insurance, also known as final expense insurance, can cover any end-of-life financial obligations.
Average Cost of Funerals and Medical Treatment
Although funeral and burial expenses vary depending on where you live and the type of service you choose, median funeral costs in the US are $7,848 for burial and $6,970 for cremation.
Average health care costs in the last year of life are $4,731 but can be nearly $100,000. These costs come at a time when individuals are unable to earn income and may not have a lot of savings left.
Role of Final Expense Insurance
It’s wise to plan ahead and provide for final expenses so that your relatives are not burdened with the financial hardship of taking care of costs after you’ve passed away. Final expense insurance can provide a lump sum payment that your family can use to cover those costs. Or you can name a funeral home as a beneficiary.
Buying term life insurance can be a vital tool for leaving a legacy free of taxes because death benefit payouts are usually tax-free. They are an excellent way to pass wealth on to your heirs or a favorite charity.
You can easily set up a trust for the benefits to be paid into if your heirs are still too young to manage their affairs. You can be confident that they will receive the funds.
Life insurance premiums increase with each passing birthday. You can lock in lower rates now than you’ll ever be able to get in future years.
Purchasing term life insurance online is easy and convenient.
Read more about life insurance, including how premiums and payouts work.
What are the pros and cons of term life vs whole life insurance?
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