September is Life Insurance Awareness Month. Life insurance has changed over the years, so it’s a good idea to study the various policies available today to educate yourself to learn what’s best for you and your loved ones.
Ignorance is not bliss! September is Life Insurance Awareness Month. Learning more about life insurance over the years, I’d like to share what this layperson has learned and share resources available for you that could help your understanding.
Life insurance is there to help reduce the financial burden on your loved ones when the inevitable happens. But every life insurance policy is different. Whether you want to make sure your family can continue paying the bills if you die unexpectedly or you simply want to cover your own funeral costs, the best type of life insurance ultimately comes down to your needs and budget.
Types of Life Insurance
This month, Ryan Brady from NerdWallet.com outlines the different types of life insurance in the US. Click to learn more about each.
- Term life insurance
- Whole life insurance
- Universal life insurance
- Variable life insurance
- Burial insurance
- Other types of life insurance
| Types of life insurance | Coverage length | Builds cash value? | Death benefit |
|---|---|---|---|
| Term | Temporary — typically 10, 20 or 30 years. | No. | Fixed. |
| Whole | Lifetime. | Yes. | Fixed. |
| Universal | Lifetime. | Yes. | Flexible. |
| Variable | Lifetime. | Yes. | Flexible. |
| Burial | Lifetime. | Yes. | Fixed. |
Underwriting
Underwriting refers to how a life insurance company calculates the risks of insuring you. A policy’s underwriting determines a few things, like how quickly your coverage will go in force, whether you’ll need to take a medical exam and the price you’ll pay.
There are three main types of life insurance underwriting:
Fully underwritten life insurance
If you’re healthy, fully underwritten policies will generally be the cheapest option. This is because the life insurance application process typically includes a medical exam and questions about your health as well as questions about your family’s health history, your hobbies and your travel plans.
Insurers use this data to price the policy more accurately based on your specific life expectancy. To get the most favorable rate, aim to provide as much information as possible when filling out your application.
Simplified issue life insurance
Simplified issue policies don’t require you to take a medical exam. However, you may be asked a few health questions and could be turned down based on your answers.
Instant-approval life insurance policies use quick, online health questionnaires as well as algorithms and big data to speed up the application process.
Guaranteed issue life insurance
Guaranteed issue life insurance requires no medical exams and no health questions. In short, you can’t be turned down for coverage if you’re within the eligible age range, which is typically 40 to 85. However, this is an expensive way to buy life insurance, and coverage amounts are generally low.
In addition, these policies have graded death benefits, which means if you die within the first few years of having the policy, your beneficiaries may receive only a partial payout. People often buy this type of life insurance if they’ve been turned down elsewhere because of their health but they want to cover final expenses, such as funeral costs.
In January 2024, 51% of consumers reported owning life insurance (e.g., individual, employer-sponsored, etc.), which is down significantly from 63% in 2011. The number one reason consumers give for not purchasing life insurance — or more of it — is that it’s
too expensive.
Yet, since the first annual Insurance Barometer Study was conducted in 2011, consumers have consistently overestimated the cost of life
insurance. The most recent study shows about three-quarters (72%) of Americans overestimate the true cost of a basic term life insurance policy. LIMRA provides information to educate about life insurance. Check them out, if you’re curious and want to learn more.
Image by Gerd Altmann from Pixabay
Decisions
Making decisions about how best to protect yourself and your family is a personal choice. For those who have life insurance policies with work, are you able to take the policy with you if you no longer work there? If not, would you feel more prepared to have a policy of your own?
To check complaints about an insurance company, NAIC provides this tool to check if researching in advance of purchasing is something you like to do.
Would love for you to join Rachael, Barb, and me on October 1st at 9 am PDT. We’re hosting a free one-hour workshop to help you organize your documents and getting your $tuff together!
Accountability (Rachael’s expertise), Reduce stress and anxiety (Barb’s expertise), and Important Documents (me!) will be your hosts. It’s a great time to prepare!
Join us Tuesday, October 1st at 10am PT/ 1pm ET! Register HERE Reach out via Email or Message me if you have any questions. For additional information about my work check out @ The Living Planner or @ The Living Planner.
Sharing this quote from William James today “No decision is, in itself, a decision.” Here’s to making informed decisions! – Lynn
#Can’tPredictCanPrepare #PlanfortheUnplanned