What you need to know about life insurance futures-Life insurance could play a crucial role in your family's financial well-being if the unthinkable happens. Term life insurance is one way to get your family covered without spending a fortune.
People often think life insurance is too expensive or they can't afford it because of other financial priorities. How can you possibly afford life insurance when you're paying off debt, saving for retirement and putting your child through college? Term life insurance is one option. It could cost you less than $1 a day.
"Consistently consumers have told our researchers they believe they can't afford life insurance, but when we dug deeper, our research showed that many overestimate the cost by as much as 300 percent," says Robert Kerzner, LIMRA's president and chief executive officer.
LIMRA's 2016 "Trends in Life Insurance Ownership" study and LIMRA's 2017 Insurance Barometer Study found that:
- 30 percent of households don't have life insurance
- 20 percent of households with children under age 18 don't have life insurance
- 43 percent of families without life insurance say they would be in immediate financial trouble if a primary wage earner died
What is term life insurance?
Term life insurance covers you for a set period, such as 10, 15, 20 or 30 years. A policy will pay your loved ones the face value of your policy if you die during that time.
So if you purchase a 20-year term, $250,000 life insurance policy, and you die five years later, your beneficiaries would receive the $250,000. The benefit ends after 20 years.
Life insurance is cheaper when you're younger. So, if you purchase it when you're in your 20s, your premiums will be much lower than if you wait until you're in your 40s.
That's one of the reasons it's important to figure out in advance how long you'll need the coverage. You'll end up paying higher rates if you decide to renew later. Your age is a key factor in setting rates.
Plus, you'll likely have to go for a medical exam or answer questions about your health. If you're in poor health, your rates will be even higher, or you may find that you might not qualify for a term life insurance policy.
Many employers and organizations offer life insurance. However, you may find these plans don't cover your needs. In that case, you'll need to supplement your policy with individual coverage. Also, you'll lose that group life insurance benefit if you leave your job.
One reason some people may shy away from term life is that you pay premiums, but don't get any of that money back if you outlive the policy. There is an option in that case. Return-of-premium term life policies repay you the amount you paid in for coverage. However, those plans cost much more than regular term life policies.
Another consideration is convertibility, which allows you to convert your term life policy to permanent life insurance without having to answer health questions. Some term policies let you make the switch within the first few years after you've obtained coverage. Other policies allow you to make the change at almost any time that you have the policy.
How much does term life insurance cost?
Many factors go into the cost of term life insurance, including age, gender and health status. Here are the average annual premiums for term life death benefits of $250,000 for people classified as "Regular" health.
Average Annual Premiums for Term Life death benefit of $250,000
| Health profile and term length | Age 30 | Age 40 | Age 50 | Age 60 |
| Female non-smoker 10-year term | $232 | $318 | $598 | $1,225 |
| Female non-smoker 20-year term | $303 | $466 | $948 | $2,316 |
| Female non-smoker 30-year term | $426 | $693 | $1,573 | $7,300* |
| Female smoker 10-year term | $448 | $704 | $1,508 | $3,279 |
| Female smoker 20-year term | $602 | $1,166 | $2,337 | $5,406 |
| Female smoker 30-year term | $910 | $1,634 | $3,669 | $13,030* |
| Male non-smoker 10-year term | $274 | $377 | $769 | $1,782 |
| Male non-smoker 20-year term | $357 | $578 | $1,202 | $3,179 |
| Male non-smoker 30-year term | $523 | $866 | $2,065 | $7,300* |
| Male smoker 10-year term | $565 | $885 | $2,003 | $4,492 |
| Male smoker 20-year term | $753 | $1,363 | $3,141 | $7,107 |
| Male smoker 30-year term | $1,164 | $2,131 | $4,460 | $13,030* |
How much term life insurance do you need?
A good starting point if you want to determine how much coverage you'll need and how much you might pay is the life insurance calculator on LifeHappens.org. The website of the nonprofit organization Life Happens educates the public on life, disability and long-term care insurance.
When deciding on how much life insurance you need, think about:
- Funeral costs
- How much it will cost to replace your income
- The services that you provide your family, such as child care
- Your outstanding debts, such as mortgages, credit card bills and loans
- Long-term financial commitments, such as paying for your child's college
Term life extras and riders
Term life policies can include extra features or riders. For example, your policy may include an accelerated death benefit. This type of rider lets people who are terminally ill, have a chronic illness or in long-term care tap into life insurance, while still leaving your loved ones with the remaining life insurance benefits.
You also may receive a disability waiver of premium, which grants you a waiver on paying your premiums if you're disabled for at least six months.
And some policies offer double or triple the payout if the death is an accident.
Here are common term life riders:
- Accidental death -- As you might expect, this rider pays out more money if you die in an accident. By getting this rider, you usually double the payout. So, let’s say you have a $250,000 term life policy with an accidental death rider. Your family would get $500,000 if you die in an accident.
- Guaranteed insurability -- This rider lets you add onto your policy without a medical exam. You may find that you need a larger policy. If you have this rider, you won’t have to go through an exam before the insurer expands your policy.
- Family income benefit -- This rider will provide income in case of the death of a family member. Let’s say your spouse dies. You no longer have that income, so making mortgage payments may become difficult. This rider provides funding to help you in that situation.
- Waiver of premium -- The rider waives your premium if you become totally disabled or you lose your income because of injury or illness.
- Long-term care waiver -- The rider provides help if you need long-term care in a nursing home or home care. There is also separate long-term care policies.
- Accelerated death -- If you have this rider, you can receive a benefit if you’re diagnosed with a terminal illness that will shorten your life. An insurance company may give you at least one-quarter of your death benefit while you’re alive in this case.
Shop around for term life insurance
You want to get quotes from multiple life insurance companies, so you get the best rate. Make sure you get the same policy from each insurer. That way you compare the same policies from each company.
You should also check each insurer's financial stability ratings. You want to make sure the insurance company is reliable and that your family will get what they're owed in case you die.
Once you confirm the company's standing and you're received multiple quotes, you can decide which term life insurance policy is right for you and your family.
Source : Insurance.com
