Imagine you’re at that next big job interview; you know the one you’ve been preparing for and praying about for years. The interview is going better than expected and you’re navigating the questions with ease…then, the interviewer asks you “what drives you to go to work every day; what motivates your actions; why are you looking to advance your career?”…you take a slight breath and with a wide smile proudly state “my family”. The interviewer returns a smile and then asks you a seemingly benign follow-up question: “What if you were injured/disabled and unable to continue working or were to pass unexpectedly? How would your family be cared for”? If you’re unable to answer these questions you’re not alone!
According to LIMRA (Life Insurance and Market Research Association), only 59 percent of Americans have life insurance and roughly half of those are underinsured. Life insurance provides your family with financial security and peace of mind knowing your loved ones are fully protected. Understanding the amount of money your family would require to meet financial obligations if you pass or become disabled is a great place to start. The life insurance experts at SimpleLife can help you calculate your needs and design a life insurance plan to meet them.
In this article
- Funeral: Casket, embalming, service, gravesite, headstone, and other items cost between $7,000 and $10,000.
- Housing/Mortgage: Median monthly mortgage payment is $1,030 according to the U.S. Census Bureau. The annual home insurance average cost is $1,228.
- Children: U.S. Department of Agriculture estimates the cost of raising a child at $233,610, excluding the cost of college.
- Other: Basic necessities from food estimated at over $6000 per household to transportation at $225 per month.
How do I protect my family?
Life Insurance allows you to protect your family when you’re not around and gives you peace of mind while you are! In exchange for your payments (premium), life insurance companies guarantee a benefit (face amount of the policy) to be paid to your chosen beneficiaries upon your death. For example, if you purchased a 10 year term policy with a death benefit (face amount) of 500,000 and died within those 10 years, the insurance company would pay out 500,000 to your chosen beneficiaries. The death benefit will allow your family to cover the funeral costs, mortgage payments and continue the way of life you worked so hard to help create for them. SimpleLife can help you decide between term life insurance which will provide coverage for a specific number of years like 10, 20 or 30 or whole life that will protect you as long as premiums are paid.
Reasons to purchase a life insurance policy
- Young Professionals
Whether you’re just finishing up school or starting that first big job, purchasing life can be a great idea. The price you pay for a life policy is based on many factors including your age and medical history. By taking advantage of your youth, you can acquire life policies at prime rates that may allow for conversion later in life to more permanent policies. In addition, you may have student loans and/or credit debt with a parent who signed a promissory note on your behalf. Private student loans generally do not offer loan forgiveness upon death and federal loans are taxable to your estate. Purchasing a policy to cover these debts can be a very strong financial decision and the cost should be very affordable for healthy individuals.
- Getting Married/Starting a family
Marriage intermingles financial obligations between partners. Each partner shares in the responsibility of financial security for the other and can mitigate the financial loss suffered from death through life insurance. The death benefit will allow for the surviving party to continue their way of life financially and ease the burden of shared debts. A permanent policy will offer cash value that can be used to borrow against devoid of income taxes to help with mortgage payments and other tax obligations. Starting a family, as highlighted earlier, involves a significant investment; from basic necessities such as food and clothing to daycare and education expenses. Having a death benefit secured protects your children’s future and can help with future education/college expenses.
- Mortgage Protection
For many, achieving the American dream is synonymous with owning a home! One of the most common reasons for a life insurance purchase is to protect the debt from a home purchase. Term policies or a permanent policy with a decreasing term rider are excellent options for mortgage protection. For a standard 30 year mortgage, you would simply purchase a term life policy that covers the cost of the home loan. A permanent policy would allow for future home equity lines and home repairs via the death benefit and cash accumulation.
- Estate planning
Protecting your wealth and allowing for wealth transfer to your dependents is paramount. Depending on the size of your estate, it may be subject to taxes on the state and federal level. A life policy would cover the estate taxes and allow for true wealth transfer as opposed to having to sell off assets. In addition, the benefit will meet funeral costs, help with medical bills and other outstanding debts.
Whole life policies accumulate cash and provide death benefits. As a complement to a retirement plan, life insurance can allow for tax-deferred savings. The key benefit comes from the tax-free proceeds passed on to your dependent. Borrowing against the cash value can also compliment a multifaceted retirement strategy by preventing you from leveraging other retirement vehicles for emergency expenses.
- Business Needs
Whether you have a key employee, a significant stake in a start-up venture or own a business with a few other parties, it’s a great idea to seek life insurance protection.
Key person insurance involves a company purchasing a policy on a key employee, naming the company as beneficiary and paying the premiums. If an unexpected death occurs, the company receives the death benefit which allows time to replace the employee and stay afloat.
Buy-sell insurance generally covers a buy-sell agreement that owners enter in to purchase the interest of a deceased owner. This is accomplished by each owner purchasing a life insurance policy on the other. The death benefit would be used to purchase the equity of the deceased individual and allow ownership to stay with the others noted in the buy-sell agreement.
Creditor coverage is generally a requirement for small business loans and life insurance provides the collateral needed for the lender to get comfortable with the risks. The policy would be collaterally assigned to cover the loan amount should you unexpectedly pass.
Life Insurance benefits
- Guaranteed death benefit
- Peace of mind that your loved ones are protected
- Favorable Tax Treatment as death benefits are generally income-tax-free to beneficiaries
- Whole life policies provide cash value accumulation allowing for tax-deferred savings and policy loans
- Death benefits may be Estate-tax free when meeting certain stipulations
How do I know much coverage I need and how much will I have to pay?
SimpleLife will craft a life insurance plan tailored to your individual needs accounting for your financial obligations and future goals. Assessing your income, net worth, household size and debts are the key places to start. Taking into account your current financial picture and future estimated estate growth will provide the face amount foundation. As for the cost of the insurance, it will depend on the type of policy (term or perm), your individual health history and the rates at the best carrier for you. Many carriers have specific medical risks that they are more comfortable with and offer the most competitive rates. For example, one carrier may charge you a higher premium for diabetes than another. Also, smoker classifications vary largely between insurance carriers and choosing the wrong insurer can cost you significantly. Our experts are standing by to help make the best selection for you and are able to provide you quotes from 12+ top-rated insurers.
Make the decision to provide unparallelled financial security for your family by reviewing your insurance needs today. Next time someone asks you how your family would be cared for if you passed just say that I’ve got that covered with life insurance. SimpleLife would love to be a part of your life insurance journey and we look forward to connecting with you!
SimpleLifes’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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