Answering Common Questions About Life Insurance
The COVID-19 pandemic has more and more people asking about life insurance.
What is it? How does it work? What types of life insurance policies are there? How do I choose the right one? How much does it cost?
For starters, life insurance provides a death benefit to your family after you pass away. The benefit takes the form of cash payments to replace the lost income they need to live on in your absence. It may also cover things like funeral expenses, the cost of daily living or college tuition for your children.
With September being Life Insurance Awareness Month, we’d like to answer some of the most common questions people have about life insurance.
Why Do I Need Life Insurance?
Similar to estate planning, life insurance is one of the best ways to show your love to those you leave behind. It protects your loved ones from the many financial burdens they may be facing after you’re gone.1
What if they can no longer rely on your salary to cover their expenses? How will they continue to afford the rent or mortgage? Will they be able to pay for food, healthcare, utilities and other necessities? What happens to their own dreams of attending college and other future plans? Your life insurance policy can be tailored to ensure that your spouse, children and other beneficiaries will have their needs met even when you’re no longer there.
Can I Still Get Life Insurance During the COVID-19 Crisis?
In most cases, the answer is yes.
For some folks, there may be a delay in setting up a policy. If you’ve tested positive for COVID-19, you may be required to wait until you recover to purchase life insurance. There may be a waiting period if you’ve recently traveled to an area considered to be a “hot spot”.2
There may also be changes involving policies that require a medical exam. Some insurers may extend the deadline for completing the exam, or accept records from a recent doctor visit. A few companies may temporarily waive this requirement.2
If you already have life insurance, most policies will pay a death benefit should you pass away due to COVID-19.3
Isn’t Life Insurance Expensive?
One of the biggest myths that many people believe about life insurance is that they can’t afford it. Studies show that up to 80% of consumers overestimate the cost of life insurance.4
The reality is that every policy is unique. If you shop around, it’s actually quite easy to find life insurance coverage that meets your needs and fits into your budget.4 Some of the things that could affect your premiums include overall health, age and occupation.2 It’s also perfectly okay to ask various life insurance providers to give you quotes for their policies. Getting these estimates can help you know what your options are and help you make the right choice.
Am I Too Young for Life Insurance?
Another common myth is that life insurance is only for older adults. The reality is that you can find life insurance policies designed for infants all the way up to seniors. Premiums do tend to be lower the younger you are at the time of purchase.4
One important question to ask when considering different policies is this: If you were to pass away, what would be the financial impact to others? Your goal is to buy coverage that would leave your beneficiaries with fewer out-of-pocket expenses.
Isn’t My Employer’s Life Insurance Plan Enough?
Some people assume that if you get life insurance through your job, or your spouse’s job, that’s all you need. Keep in mind that we are living through uncertain times. What happens if you change jobs or get laid off?4
Even if you anticipate staying in your current job for the long term, it’s still a good idea to review your employer’s plan. Does coverage begin as soon as you sign up or is there a waiting period? What is the dollar amount? How much does the policy cover? How long does the policy last? Getting the answers to these questions will help you determine whether additional coverage would benefit your loved ones.
Do I Still Need Life Insurance if I’m not the “Breadwinner?”
Many people think that only the highest income earner in the household needs life insurance. But what if that second source of income suddenly disappeared? Would surviving family members be able to meet all of their needs on just one salary?
Even stay-at-home parents perform a number of activities that might need to be paid for if that person were no longer around. Examples include childcare, preparing meals, cleaning and transportation.4
What Type of Life Insurance Do I Need?
There are two basic types of life insurance policies available:
- Term life insurance only pays a benefit if you die within the term of the policy, typically 1 to 30 years. It is the simplest form of life insurance and is designed for those needing shorter-term coverage.
- Whole life insurance pays a benefit whenever you die, no matter how long you live. It is ideal for those needing coverage they can hold onto for the long term.
The life insurance policy you choose depends on your individual circumstances. How much would your spouse and dependent children need to live on? Would they be able to save for college and other major expenses? Would you be leaving behind any outstanding debts they would need to take care of?1 Are you looking to leave any assets to a favorite charity?
A financial advisor or life insurance agent can help you review your options and select the best life insurance policy for you and your family. If you’re ready to get started, call The Resource Center at 417-882-1800 or reach out to us online to schedule an appointment.
Interested in Learning More About Estate Planning?
At The Resource Center, we’re dedicated to helping individuals and families with their financial needs. Through comprehensive estate planning strategies, we strive to help you pass on your legacy and help ensure your beneficiaries will be taken care of when the time comes to enact a will, trust or in utilizing the power of attorney. With The Resource Center’s estate planning services, our team will help inform you on the planning options which may be useful as we guide you in creating a strategy designed to work when your loved ones need it. Have the confidence that your personalized Estate Planning strategy can help meet your current needs, work toward your long-term goals, and help protect you and those you love. If you’re interested in learning more about estate planning, sign up for The Resource Center’s free, monthly meeting.
Sources:
1: https://www.limra.com/en/newsroom/limra-unplugged/2020-Life-Insurance-Awareness-Month/
3: https://www.linkedin.com/pulse/3-reasons-life-insurance-key-topic-during-covid-19-faisa/
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and The Resource Center, Inc are not affiliated companies. Life insurance policies are contracts between the client and an insurance company. Life insurance product guarantees rely on the financial strength and claims-paying ability of the issuing insurer. 708703-9/20
