September is Life Insurance Awareness Month, making it a good time to review things you may not know about life insurance, such as:
Policies differ widely. Term life insurance pays out a death benefit if you die within the specified period, often 20 or 30 years. Because it only pays for untimely deaths, it is less expensive. Permanent policies, whole or universal, cost more than term insurance because they cover the insured during their entire life (as long as premiums are paid) and include a savings component.
Whole life offers a guaranteed cash value and fixed premiums. A universal policy allows you to change the death benefit and to increase, decrease, or stop premiums (provided you maintain a sufficient cash balance to cover the insurance cost). You can take a loan or a withdrawal from the cash portion of both permanent policies. Beneficiaries will not receive money left in the cash portion of either policy when you die.
People overestimate costs. Most people think life insurance costs much more than it does. Particularly if you purchase a policy when you’re young, term insurance can be surprisingly affordable. On average, a 30-year-old male can get a $250,000, 20-year term life policy for around $150 a year. Even if he waits until turning 50, the average policy is only $465 a year.
You may qualify with health conditions. Many people assume they can’t get life insurance if they have a pre-existing condition. This is often not the case, although extra screening might be required, and you may pay higher premiums. However, providing proof that a condition – such as high blood pressure, high cholesterol, or anxiety – is being managed effectively can improve your risk assessment.
Riders can add options. Riders are additional benefits that can be added to a basic policy. Some of the more common cover long-term care costs, let an insured use death benefits during a terminal illness, allow the insured to increase coverage without additional medical testing, or waive premiums if disability causes the insured to lose their income.
Some commonly available riders are:
- Accelerated Death Benefit. If you’re diagnosed with a terminal illness, you can get part of the life insurance proceeds while you’re still living to help with healthcare expenses. And if you leave the policy in place, your loved ones would still get something when you eventually pass on.
- Additional Purchase Option. If you can’t afford the amount of life insurance you need at the time you establish your policy, this allows you to permanently add more insurance later without having to prove your continued insurability.
- Waiver of Premium. If you become temporarily unable to work and can’t afford your premiums, this allows you to stop paying until you’re back up and running.
- Return of Premium. This policy allows for a sort of refund if it goes unused. If, by a certain pre-determined point in the future, the policy hasn’t paid a death benefit, it can be cancelled and the payments returned to the owner.
- Term Insurance. If you have a permanent cash value policy, and have a temporary need for a fixed amount of additional coverage, this allows you to add more term coverage to your existing policy for a specified period, potentially saving you the time and additional costs associated with purchasing a separate policy.
- Long Term Care Insurance. In the event the insured has to stay at a nursing home or receive home care, this rider offers monthly benefit payments.
There are many ways to incorporate insurance as part of a robust, lifetime financial plan. To see if it makes sense for you, let’s connect soon.