It’s LIAM! (Not that Liam)
Do you remember
the 21st night of September?
Ba-dee-ya, say, do you remember?
Ba-dee-ya, dancin’ in September
Ba-dee-ya, never was a cloudy day
September isn’t just a great song by Earth Wind and Fire, it’s also Life Insurance Awareness Month. It’s a perfect opportunity to review your policy if you have one or start looking at options if you don’t have one yet.
Life Insurance is one of those things that most people don’t like to think about, but it plays a vital role in your family’s financial portfolio.
Types of Life Insurance
There are 3 main types of Life Insurance: Term Life, Whole Life, and Universal Life.
Term Life is the most basic and easy-to-understand type of Life Insurance. It provides a Death Benefit to your beneficiary if you die during the policy period (term). For example, if you have a $500,000 20-year term life policy, your beneficiary would receive $500,000 (tax-free) if you die during that 20-year period.
Term Life is good for people who want income replacement for their spouse and dependents. A good rule of thumb is to purchase 10-15 times your annual income, that way your beneficiary can invest the Death Benefit and use the returns as a replacement for your income.
The premiums are locked in for the term so you can budget ahead for it. You can usually get a good amount of coverage for a low monthly premium if you’re in decent health. Most carriers offer “riders” (additional coverages) that can beef up the policy if you want extra coverages. Here are some examples:
- Child Term Rider — Provides a Death Benefit to you if your child dies during your policy
- Accelerated Death Benefit — Gives you access to the Death Benefit early if you qualify
- Accidental Death Benefit — Provides an extra Death Benefit if you die due to an accident
- Waiver of Premium Rider — If you become disabled, you no longer need to pay the premium
Whole Life can be a little more complex, mainly because it offers something called Cash Value — which is similar to having equity in your home. After a few years of having the policy, you build up some “equity” that you can take out as loans or as withdrawals.
Whole Life, as the name suggests, lasts your entire life (as long as you continue to pay the premium). That means this policy is guaranteed to pay out at some point in time, unlike the Term Life policy. With this guaranteed payout comes a higher price tag, so you won’t be able to get as much Death Benefit for the same amount compared to Term Life.
Whole Life is good for planning for final expenses, like funerals.
The most complex of the three, Universal Life can last your entire life, and it may have an investment component to it as well (Indexed Universal Life). The premiums can be flexible, so if you have some hard times, you can more easily keep your policy in force.
There are a lot of ways to set up these types of policies, so talk with one of our licensed Life Insurance advisors to help you customize this for your specific needs.
“Isn’t the life insurance application process a pain?” Not necessarily. In today’s digital world, it’s never been easier to obtain a good policy.
A lot of carriers have an accelerated application process for those in good health. In these cases, you may just need to complete a 30-minute phone call. In some cases, you may qualify instantly with no phone call or in-person medical exam. Ethos offers these instant policies — you put in your information and they will give you options for life insurance that you can purchase instantly with no phone call or exam.
Depending on your age and the amount you apply for, you may need to get a medical exam. Most carriers will allow something called a paramedical exam, which is where a health professional comes to your home or office to complete the requirements.
It’s really not that bad for most people. It’s more of a minor inconvenience, and you only have to do it one time to secure the coverage.
Which Life Carrier is Best?
I get this question a lot, and it’s hard to answer. There is no one “best” life insurance carrier. It depends on what you’re looking for. Some are really good at certain types of policies, while others have a quick and easy application process.
Here are some important things to consider when choosing a carrier:
- What is the financial strength of the carrier? Most are rated by AM Best, which tells you how good their finances are. You want a carrier that has a good rating because you may have your policy for decades. Your policy may not pay out if the carrier goes out of business. Watchmen Insurance only works with A-rated carriers.
- What does the application process look like? Some are easier than others
- What additional benefits (riders) are available?
- Is their premium competitive or close to other carriers? Cheaper doesn’t always mean better, but more expensive doesn’t always mean better either. Don’t choose one carrier over another just to save a few bucks per year.
- Do you have any specific health issues or are you in a more hazardous occupation (military, aviation, etc.)? Some carriers are better than others for these situations.
A licensed, and experienced Life Insurance advisor will know all the ins and outs of this and can help you choose the best carrier for your needs.
Everyone should have Life Insurance, and you should start as early as possible. Your eligibility and premiums are based on your health, age, and gender, so the earlier you get it set up, the less you’ll end up paying.
The nice thing about Life Insurance is that once it’s set up, you can forget about it. Most policies don’t need to be actively managed, unlike your home and auto insurance.