Life Insurance 101
January 15, 2021
It's a new year and a good time to take a look at your finances. As you work on your budget for the new year and notice some extra funds or want to make some changes, you may consider life insurance. It's a worth while investment if you care about your family. Take a look below at why it would be a good investment, how it works and the steps it takes to get started.
Why Buy Life Insurance?
For a lot of people, family matters the most. If you are recently married or are pregnant, now is the time to consider life insurance. Two of the main reasons life insurance is a good investment are family protection and income replacement. These go hand in hand. For example, let's say a newly married couple have an 8 month old baby, and the dad was driving home from work one day and got in a serious car accident that got him killed. Very devastating for the family, of course. The wife unexpectedly becomes a widow and the child will live their whole life without a father figure. The couple never considered life insurance for whatever reason, and when this happens the dad's income suddenly disappears and it becomes harder for the widowed mom to provide for the baby. This is where life insurance comes in. See the next few questions for how it works and the factors that help determine what you pay.
Hoes Does Life Insurance Work?
Term life insurance is pretty simple. It's insurance on your life. So if you were to die during the policy period, the person you want to protect (beneficiary) would receive a certain amount of money (death benefit). You get to select how long the term/policy period is (10, 20, 30 years) and how much your death benefit is ($100k, $250k, $500k). In the example above, let's say the married couple each bought a policy a few weeks after they got married. Each of them bought a 20 year term, $250k death benefit policy, naming each other as their beneficiary. So when the husband dies (which was during the first year of the policy period), the wife would receive $250k. This will help pay for things for their baby.
How Much Will I Pay For Life Insurance?
Great question. There a few different things insurance companies look at when determining how much you will pay.
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Your Age - Actuaries work very hard to figure out your life expectancy which in turn helps the insurance companies determine the rate for your life insurance.
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Medical History - Cancer is the biggie here. If you have had any history with cancer, then your life expectancy will go down, therefore, causing your rate for life insurance to go up.
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Smoking Habits - Pretty self explanatory here. If you have a history of smoking, then you have a higher chance of getting lung cancer. Again, any risk of cancer will cause your rate to increase.
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Height & Weight - These two things play a factor in your life expectancy but much less of a role in determining your rate than the previously stated items.
Give it a whirl. Call us and we would be happy to get the process started for you by asking a few questions and get quotes sent over to you. If things looked good, we would help get you set up for a more formal conversation where they ask for some more info before finalizing the policy. Simple as that. Get a good rate when you're young. It's the most selfless thing you can buy. Protect your family and the ones you love.