Topics:Life Insurance 101 buying life insurance final expense insurance tips and advice policy riders business life insurance life insurance facts research
If you're looking for a way to leave money to your children, other family members, or friends, a whole life insurance policy is a nice way to do that. In addition to leaving money as an inheritance, the policy's death benefit can be used to take care of funeral costs and any other debt. Whole life insurance is expensive. However, its premiums are fixed, so they will not increase or decrease over time. Whole life insurance also offers coverage for a lifetime (as long as you pay premiums) and accrues cash value that you can use as an asset while living. As you consider buying whole life insurance, here are nine things experts say to evaluate before you make a purchase: Advice from your financial adviser Your purpose Cash value growth Policy loan options Dividends Riders Coverage amount Affordability and sustainability Universal life insurance Advice from your financial adviser Whole life insurance is a major purchase with continual monthly fees, so you'll want to carefully evaluate how a whole life insurance policy fits into your overall financial plan. "ALWAYS seek the counsel of a qualified financial advisor. This does not describe most life insurance agents, who do not possess the knowledge or skill to provide comprehensive financial advice," advises Rob Drury, Association of Christian Financial Advisors executive director. Discussing your financial goals, current budget constraints, and why you want a whole life policy with your trusted financial adviser will help you determine if whole life insurance is a good fit and how much you should buy. Back to List Your purpose The second thing you should think about is why you're buying life insurance. "Individuals need to ask themselves what goal they are trying to achieve with the purchase of life insurance. For most, the goal is to provide for their dependents should they pass away prematurely. In those cases a term life insurance policy would make more sense. They are less expensive than whole life policies because they only have a death benefit component to them," says Alan Schoenberger, CFP® and Endeavor Financial Planning founder. If your coverage needs are short-term, then a term life insurance policy may be a better fit. However, if you want to have an asset to borrow from or leave a tax-free inheritance, a whole life insurance policy can be a good fit. Keep in mind, however, that while the death benefit is not subject to tax, it can be taxed as part of an estate. For more tips on choosing between term and whole life insurance, read: "Term Life Insurance vs. Whole Life Insurance". Back to List Cash value growth One advantage of whole life policies is that they typically have a guaranteed growth rate for the cash value of the policy. As you compare whole life policies, consider the rates of return offered by different insurers. Zhaneta Gechev, One Stop Life Insurance founder, also recommends looking at other investment options: "What is the interest rate that the carrier is guaranteeing you? Are you able to have a greater rate of return with a different investment tool?" In some cases, it may make more sense to increase your investment in a retirement plan because of the rates of return, like a 401(k) or IRA. Back to List Policy loan options As you consider investing more of your money in retirement accounts versus investing in a whole life insurance policy, realize that retirement accounts typically have tax penalties for early withdrawals in addition to paying taxes on the withdrawals. In contrast, there are no tax penalties for borrowing from your insurer with your whole life insurance policy as collateral. However, you will need to pay taxes on the loan amount you receive. If you do not repay what you borrowed, the insurer will take the balance from your life insurance policy. Before you buy a whole life policy, you also need to understand the insurer's terms for taking a loan from your policy: "What are the policy loan option details? Different companies have different loan provisions, so it is very important to understand the loan details. One option may be more favorable in certain market conditions, while another option may be more suitable for other conditions. It is important to understand the details and draw out multiple scenarios so that you are not caught by an unexpected surprise in the future," advises Henry Hoang, CFP® Bright Wealth Advisors, LLC. Reviewing these terms with your financial adviser will help you think through multiple scenarios and find a policy that best meets your needs. Back to List Dividends If you're buying a whole life insurance policy, there's an advantage to choosing a mutual insurer over a public insurer because mutual insurers are owned by the policyholders instead of stockholders. Mutual ownership means two things: 1. The insurer only answers to policyholders, so it will make decisions focused on what's best for policyholders without needing to consider stockholder interests. 2. When the insurer's investments do well, it pays dividends to its policyholders. "Because of the guarantees offered by whole life policies, they are underwritten very conservatively; therefore, premiums paid are typically far in excess of the amounts necessary to pay death claims. The excess premium collected by non-participating companies simply becomes additional profit to the insurer. For participating companies, particularly mutual companies that are literally owned by their policy owners, these excess amounts are distributed back to policy owners — either directly in cash, in the form of paid-up additions (additional death benefit), or applied directly toward future premiums," says Drury. If you're going to spend money on expensive premiums, you're better off choosing a mutual company because you'll get any excess back in dividends. "This is why most participating policies can become self-sustaining (no further premium payments needed) at about the 12–15 year point. It is important to note that dividends are dependent upon the actual amounts paid in death benefits, and are not guaranteed. However, most household-name participating companies have consistently paid dividends each and every year of their existence, many for well more than a century," he adds. When you're comparing whole life policies from various insurers, look into their history of paying dividends. How consistently had the company paid policyholders dividends? Does the insurer offer information on how much dividends it paid last year? As you consider potential dividends from your insurance policy, you should also pay attention to how the insurer treats dividends when policyholders take policy loans. Insurers have two methods for treating dividends: direct recognition and non-direct recognition. Direct recognition means that the insurer changes dividend payment rates to policyholders with outstanding policy loans. Non-direct recognition means that the insurer does not change dividend payments if a policyholder has an outstanding policy loan. Reviewing these terms with your financial adviser will help you understand which option would work best for you and give you a better sense of the value you can expect from dividend payments. Back to List Riders You can add policy riders to further protect your policy, add additional coverage, or permit early access to the death benefit. Some insurers include some of these riders as features in their policies. Others allow you to add them to your policy for an additional premium cost. A few valuable riders often available with permanent policies are: Disability waiver of premium — Allows you to maintain your policy without premium payments if you become disabled. Long term care — Allows you to use some of the death benefit to pay for long-term care if you need it. Accelerated death benefit — Allows you to receive some of the death benefit early if you are diagnosed with a terminal or chronic illness. Back to List Coverage amount The most important part of any life insurance policy is how much coverage you're buying. Usually the death benefit should be enough to allow your beneficiaries to cover funeral expenses and any lingering financial obligations. Work with your financial adviser to determine how much you should buy. Since whole life policies are the most expensive, you may want to buy what you can afford and then buy the rest of the coverage in a term life insurance policy. Gechev offers an example: "A father of two small children has $50,000 in whole life insurance only, and he is the primary breadwinner. It is clear that he is way underinsured, but his budget allows him to get only $50,000 of whole life insurance. In this case, he needs to supplement his coverage with a term policy." Back to List Affordability and sustainability Gechev's example leads us to one of the most important factors to consider: the policy's affordability and sustainability. "Whole life insurance can be an expensive option for coverage, relative to other options such as term insurance, in some cases costing 10 times more. Roughly 40 percent of policies are surrendered within the first decade, largely because purchasers overestimate their ability to continue making premium payments for years to come. Unfortunately, due to surrender charges and earlier premiums paying for upfront costs, commissions and admin fees, surrendering a policy within the first few years will likely result in a cash value significantly lower than the premiums paid into the policy," says Jonathan Seif, The ProFolio Group founder. To avoid surrendering your policy, follow Drury's advice while you're still in the decision-making phase: "Prioritize financial planning objectives within your budget. This will help determine how much money is available to pay life insurance premiums. Whole life is often the most cost effective option, but if the premium is too high, it may be appropriate to purchase some or all term insurance that has an option to convert to permanent coverage when the budget allows." If you're considering buying some whole life insurance and supplementing it with term life insurance, read "10 Things to Consider When Buying Term Life Insurance" for more expert tips. You should also consider what would happen if you suddenly lose your job and have trouble finding a new one. Would you still be able to maintain your life insurance policy? What safeguards can you put in place through personal savings to avoid losing your policy? Remember: you're playing the long game with these policies. Back to List Universal life insurance Because whole life insurance is typically the most expensive kind of permanent life insurance, you may want to consider other permanent life insurance options. Universal life insurance offers many of the same features as whole life insurance. However, the rate of return on the cash value is not guaranteed and the premiums are not fixed. Depending on the kind of universal life insurance you buy, you may have more control over where your insurance policy is invested. These policies are cheaper because you assume more risk. In addition to a whole life insurance policy from a mutually owned insurer, John Hill, president of Gateway Retirement, recommends the following types of universal life insurance: "The second recommendation is a Fixed Indexed Universal Life insurance policy, which is designed to grow your money without loss because of the market and could become tax-free income later in life. This is the 7702 policy from the IRS tax code. You want to spend your money wisely. For seniors, I would recommend a GUL, guaranteed universal life policy. It is like a term to 100. With some companies, you can take money out of the face amount for critical and/or chronic illnesses." Gechev also recommends a guaranteed universal life policy. "A guaranteed universal life insurance policy is a type of product that could be designed to give you guaranteed coverage up to age 121, the same as whole life insurance. The key differences are that it does not build much of cash value but oftentimes could cost a third of a whole life policy," she says. As you evaluate your options in the context of your financial situation and long term goals, be sure to get the advice of a financial planner. Taking your time through this process will help ensure that you make a good choice for yourself and loved ones. Life Insurers and Permanent Policies Learn more about life insurers and their permanent policy options by looking at the top-rated companies and their customer reviews. Learn More
Big purchase decisions must be weighed carefully — you've got a lot of money on the line. Life insurance is one of those big purchase decisions that can help you or your family maintain financial stability. Buyer's Guide: Term Life Insurance Download our free guide to learn more about term life insurance, how to decide if you need it, tips for choosing a life insurance company, and customer reviews. Download Guide As you consider buying term life insurance, here are 10 things experts say to consider before you make a purchase: Your need Your purpose Coverage amount Term length Policy riders Affordability Age and health Underwriting Purchase method Advice from your financial planner Your need As you're considering this purchase, you should evaluate how much you need a life insurance policy and if a term policy meets those needs. Jake Tamarkin, Everyday Life CEO and cofounder says, “Contrary to what some old school industry hacks may tell you, life insurance is not for everyone. However, it's a critical financial planning tool if you have a loved one who depends on your support to maintain their standard of living, particularly: Spouses/partners Underage and special needs children Elders and other adults you care for Co-signers of some private student loans (check with your provider — most but not all will actually cancel your debt upon borrower's death or permanent disability)." If you've got people who depend on you financially, you'll probably want a life insurance policy. Don't ignore other ways people depend on you. "Consider both the financial and caregiving support you provide your loved ones. If you were gone tomorrow, would they have the resources they need to replace that support?" advises Tamarkin. Don't forget that you can buy a life insurance policy on someone you depend on. For example, if you cosigned loans for someone and wouldn't be able to pay them back if they passed, you can buy a policy to insure their life with yourself as the beneficiary. Term insurance is a great fit for this example because you likely only need coverage until the loans are paid off. In addition to considering who depends on you, you'll also want to consider your financial obligations. "You may need money for your mortgage, a college fund, or income for those left behind if you were to pass. Knowing how much you will need for a mortgage is easy, but a college fund will take some planning — and don’t forget to factor for inflation. Income needs can be calculated by finding what it takes to run your household, multiplied by the number of years you want to cover," says John Hill, president of Gateway Retirement. As you're evaluating your life insurance need, you should also consider funeral costs and final expenses. These are quite expensive, with the most recent medians being reported as $7,360 for burials and $6,260 for cremations from the National Funeral Directors Association. The only drawback to using term life insurance for this purpose is that it will only provide a death benefit for a certain period. Once the term finishes, you won't have coverage. In these cases, a permanent or final expense policy may be better options. Though, most final expense policies are available to people nearing seniorhood. Once you know what your life insurance needs actually are, you'll be able to tell if a term life policy is the best fit for you. Back to List Your purpose Once you understand your life insurance needs, you'll have a clear purpose for buying life insurance. “When you’re trying to decide between a term and permanent policy, ask yourself: Are my financial obligations temporary? Think: A mortgage, student loans and college tuition. If your responsibilities have an end date, term life insurance is your best bet — and as a bonus, it’s the cheapest and most straightforward policy," advises Katia Iervasi, insurance writer for Finder.com. Knowing why you're buying life insurance gives you more direction through the buying process. Back to List Coverage amount How much coverage you buy really depends on your needs and purpose. Nick Kolbenschlag, Crown Wealth Group managing partner, identifies good questions to think through as you decide the amount of coverage you need: How much debt do I currently have? What goals for my family would need to be funded if I passed (ex: kid’s college education, spouse retirement)? What monthly income would my family need to maintain their current lifestyle? How many years would they need to maintain that before using their retirement assets? What amount would I like to pass to the next generation? Once you've considered these questions, you'll want to do some calculations: "Multiply the monthly income need by 12 months and then by the number of years needed, add to it your debt balance, the goal funding needs and the legacy amount to get to the death benefit (face value) needed at this point in time. We then determine the number of years we need the coverage in place (term)," says Kolbenschlag. Life insurance is an important purchase, so you need to make sure that you're buying the right amount. "Getting this question right is critical and too many agents and buyers don't put enough effort into getting this right. The work is worth it, because this is the biggest driver of both the ultimate cost of your coverage as well as the peace of mind that you are fully protecting your family," says Tamarkin. It may be easier to buy a single policy for the largest amount your family would need. If your family needs less, it's not like they wouldn't appreciate having more. However, doing so can restrict your monthly budget. "For example, imagine you are buying life insurance to support your newborn child until they graduate from college. That's perhaps 22 years of your after-tax income you need covered today. But in 10 years, you will only need 12 years of your income covered. You can save 30–60 percent of your cost by stacking a couple of smaller policies that step down over time, rather than buying one big policy that leaves you overinsured and overpaying down the road," advises Tamarkin. Another advantage of planning this way is that if your financial circumstances change, and you can't afford all of your life insurance policies, it's easier to drop one policy while still maintaining some coverage for your family than it would be if you lost the only life insurance policy you had. However, if your needs increased over time, you'd have to buy an additional policy. Buying life insurance can be a hassle because of the underwriting process, but it's doable. You'll also have more flexibility with your monthly budget if you only have the coverage you need, not more than you'd need. Back to List Term length You'll need to decide how long you want to have a life insurance policy in place. Knowing why you're insuring yourself or someone else can help you determine the length of coverage you need. "Always ask how long you will want or need coverage. Keep in mind that if you need coverage beyond the level term period, (i.e.15, 20, 30-year term) you may have been better off not purchasing term but rather permanent insurance," advises Raquel Murphy, Vice President of Individual Life Insurance with HUB International Northeast. Keep in mind that your needs may change overtime, which can affect how long you need a policy. If you're buying the policy to protect your family, how long will that protection matter? For example, if you just need the additional protection while your partner finishes school because they'll be able to support themselves well afterwards, you may just want a policy that covers those years. Of course, you can always buy a longer term than you think you'd need to play it safe, too. Back to List Policy riders Life insurers often offer riders with their policies. These riders offer additional coverage or help protect your policy. A few common examples include: Disability waiver of premium — If the policyholder becomes disabled, they can maintain the policy without paying more premiums. Accidental death rider — If the insured dies in an accident, the beneficiaries will receive an additional sum as part of the death benefit. Accelerated death benefit — If the insured has a terminal illness or chronic illness that meets the terms of the policy, a portion of the death benefit can be received before the insured passes. An accelerated death benefit is a kind of living benefit that can be added to some insurance policies. Here are a few specific to term insurance: Term conversion — You can convert the term policy into a permanent one without going through a new underwriting process. Watch out for the timing and deadlines for doing so. Return of premium — Once the policy term is over and a claim wasn't needed, the policyholder can be refunded their premiums for the whole policy. Renewable term — You can renew your policy at a new premium rate when your initial policy's term ends. Keep in mind that the premium costs will generally be higher when you renew. Some insurers include these features with their policies, other insurers offer them as options. Adding riders to your policy will affect your monthly premium costs for a policy. However, if these riders are important to you, it can be worth paying an increased premium. If you're buying a term policy because that's what you can afford right now even though you'd prefer to have a permanent life policy, choosing a policy with term conversion can help you maintain your coverage permanently in the future. It's also advantageous in case new health issues arise. "If you're healthy, a new term policy might be less expensive, but converting an existing term should be considered by anyone with health complications. Underwriting for the new policy is based on your original underwriting, not what you would currently qualify for," says Zachary Paschke, insurance agent and Term Life Guidance founder. It's also helpful if you're buying term insurance at an older age: "Before you buy a new term policy, see if you can convert your existing policy into a GUL (Guaranteed Universal Life) policy. These policies work much like a term policy. Instead of selecting a term (number of years) you select the age you want to coverage until. These policies are often available until age 80–121 depending on the company. I've saved clients huge amounts of money converting policies into GUL policies. One client came to me looking for a 20-year term policy in his late fifties He converted an existing policy and got more coverage until age 121 for less money," says Paschke. If your policy has a term conversion feature, make sure you understand what the terms of the conversion are. Checking will help ensure that you don't miss the deadline to convert your policy into more permanent coverage. "Check your conversion terms in your policy well before your policy runs out! Terms vary by carrier. If you're buying a policy now that will expire around your sixties be looking for a policy with top notch conversion terms. This is rarely something people ask agents about, but could save a ton in the future if you need it. It's an insurance policy for your insurance policy," recommends Paschke. Back to List Affordability Of course, the bottom line will be what you can afford to pay in monthly premiums. If you are unable to make premium payments, you'll lose your life insurance policy and will need to buy a new one later in order to have coverage. "What can I afford? In this question, don’t push too hard. You want to be comfortable with the cost," says Hill. The good news is that you'll likely be able to afford more coverage with a term life policy than with a permanent one. Because the coverage is limited to a set amount of time, term policy premiums are often much less expensive than permanent insurance premiums. Back to List Age and health As you consider what you can afford right now, you'll also want to think about how your situation may change over time and affect future life insurance choices. "Every insurance policy is bought based on your assumptions. If you get a 10–20-year term policy, you are assuming you will be able to afford another policy financially and health-wise at the end of the term. Life insurance is based on your age and health to qualify. The older you are, the more a policy will cost," says Hill. If you develop health conditions, you may also see increased premiums or even be denied coverage. If your policy has a renewable term rider, that can be advantageous. However, there are limits that can make this unfeasible. Back to List Underwriting Underwriting is how insurance companies determine whether or not they will insure you and at what cost. Many factors are considered during underwriting. Even when you buy term life insurance, the kind of policy you buy will affect how thorough the underwriting process is. "Fully underwritten insurance is much, much cheaper but may require a medical exam depending on your situation and the carrier's risk appetite. If a provider promises in their marketing material that no medical exam will be required, you can be sure they are charging you more for the incremental risk they are taking, and the extra cost can be huge," says Tamarkin. If you'd rather have a simpler underwriting process or no underwriting at all, you can opt for guaranteed issue policies. Just know that you'll pay for that convenience with higher premiums. "People must understand that if they outlive those 20 years, they're likely to have an annual renewable term rider automatically which means the cost will increase from year 21 on up until they can't afford it anymore. The price at year 21 will equal to whatever age they're at. As an example, a client with one of the companies I write for at 30 years old, non smoker at standard health would pay $22 per month for $250,000 for 20 years. At age 50, the price would jump to $80 per month. Still doable but after another 20 years, if they reapplied and got that price, it would be impossible to get due to the price for a 70 year old," says Justin Ehrhardt, TheBeardedFinancialPro.com. Weigh future health developments, increasing age, and your future financial position as you determine the length of your policy and what riders you'd like to have as you decide what kind of underwriting you prefer. Back to List Purchase method When you're buying term life insurance, you can work directly with an insurer, work with an independent agency, or even apply and buy it online in one sitting. We'll review each option briefly here. For a more detailed analysis with insight from insurance experts, read "What's the Best Way to Buy Life Insurance?: What You Need to Know About Buying from an Insurer, Agency, or Online Retailer." Buying directly from an insurer will help you establish a point of contact there in case you ever need to update your policy if you move or want to change your beneficiaries. You will, however, be limited to the policies and underwriting guidelines offered by that insurer. Generally speaking, underwriting guidelines are very similar across companies. However, some companies will underwrite medical conditions like diabetes more favorably than others. A few of Best Company's top-rated insurers include Northwestern Mutual, Prudential, and National Life Group. Working with an independent agent or agency is advantageous because they represent multiple insurers, which means you can compare your options across companies to find the most favorable policy that meets your needs. While some agencies have a local focus, others offer their services broadly and connect with clients online. A few examples include Quotacy and Policygenius. Keep in mind that agents do not charge their clients because they earn commission from the insurers they represent for the policies they sell. Even though independent agents are less biased than the insurer representatives, make sure you work with an agent that you trust to avoid being pushed into a policy that may not be the best fit for you. It will usually take a little bit of time to be approved and issued a life insurance policy if you work with an agency or insurer, especially if your policy is fully underwritten. If you'd like to have a policy in place quickly and don't have any underlying health concerns, you can view quotes, apply, and buy a term policy online. A few examples of these companies are Bestow and Fabric. The only downside is that you may end up paying higher premiums compared to fully underwritten policies. If you're buying life insurance online, keep in mind that many of these companies are newer and have not stood the test of time compared to other insurers. Find out if another reputable insurer offers the policies or if the insurance policies are insured. You don't want to buy a policy only to have the insurer be unable to pay a claim to your beneficiaries. Back to List Advice from your financial planner Before you buy a term life insurance policy, it's worth sitting down with a financial planner to discuss all of your options and the best way to move forward. Depending on your goals and situation, a permanent life insurance policy may make sense. "Are there better choices for your money? You could get a permanent policy and have your money work for you. The term policy does not have cash value like a whole life policy does," says Hill. Maybe you want to leave an inheritance for your family through a permanent life insurance policy. "Do you prefer to leave a fixed amount or a potentially larger investment? When choosing a policy, it is important to consider which of these options you'd like to leave for your heirs. While a policy that is investing for you will most likely pay off a higher amount, this isn't always the case. If you happen to die earlier than anticipated, a fixed amount is more likely to pay higher. This is a question to ask yourself when you consider your long term health prospects,” says Ty Stewart, Simple Life Insurance CEO and President. Permanent life policies are much bigger commitments than term life policies. Permanent policies usually have much higher premiums and offer lifetime coverage as long as you make your premium payments. You should weigh a decision to buy whole life insurance even more carefully than buying term life insurance. If you're considering a whole life insurance policy, see our article "9 Things to Consider When Buying Whole Life Insurance." However, if you can already tell that a term life insurance policy is what will best meet your needs, start exploring top life insurance companies and read customer reviews on Best Company. Life Insurers and Term Policies Learn more about life insurers and their term policy options by looking at the top-rated companies and their customer reviews. Learn More
You've got a lot of options for buying life insurance. You can buy it by working with an independent agent or agency or directly from the insurer. The internet has also changed the life insurance buying process — now you can buy from popular quote websites, connect with an agent or agency online, and even buy directly from an insurer online. "Armed with more information and price transparency, consumers are in an excellent position to pick their term life insurance 'vendor.' I use the term 'vendor' here because, in 2020, it’s not necessary to meet in person with an agent to get guidance on how much life insurance to buy — online calculators and quote engines abound," says Chris Acker, CLU, ChFC of CB Acker Associates Insurance Services. While buying term life insurance online is more common, some sites also allow you to apply for permanent life policies online. To evaluate the pros and cons of each life insurance shopping method, we'll start with the more traditional methods of buying life insurance and then cover online life insurance shopping. Work directly with the insurer Work with an independent agent or agency Buy life insurance online Work directly with the insurer You can always work directly with a life insurer to buy a policy from them. Many insurers have their own life insurance agents who can help you through the process. Some insurers like Northwestern Mutual also offer financial planning services. If you're already working with one of their financial planners and trust them, it can be convenient to work with your financial adviser to determine how a life policy fits into your broader financial goals and apply for a life insurance policy. While you can't get a better deal by working with the company directly, working with an independent agent, or shopping online, there are still some disadvantages to working directly with an insurer. The company's agent will only give you insurance policy options available through that insurance provider. If you want to compare insurance policies from multiple insurers, you'll be doing all of the legwork yourself and may not receive unbiased advice from each insurer's agent. If you have some health concerns that will affect your premium, it may be in your best interest not to work with insurers directly. "Each insurer has different underwriting guidelines, and rates can vary wildly. To score the lowest rate, compare a bunch of term life insurance quotes," says Katia Iervasi, an insurance writer at Finder.com. Working with an independent agent can help you find an insurer that underwrites your condition more favorably than others — even for permanent life insurance policies. As you compare, be sure to note how the policies from each insurer differ because there may be slight differences that affect the overall value of the policy. However, it can be nice to cut out the middleman to work directly with your insurer if: you don't have health concerns you already know which company you want to work with you are confident in your ability to research, evaluate your options, and make an independent choice Work with an independent agent or agency Instead of working with an insurer directly, you can find an independent agent who works with multiple insurers. If you work with an independent agent or agency, you can be more confident that you're getting help finding the right fit. You can choose a policy from any company, and the agent will still have made a sale. The other nice aspect of working with an independent agent is that it has no cost to you. Independent agents and agencies are paid by the insurers they represent. While there are lots of perks to working with an agency over an insurer, notice any signs that your agent is pushing a specific policy or company on you. Since agents are paid by the insurance companies for the policies they sell, rates can vary by product or insurer. Agents should be able to present quotes, benefits, and drawbacks of each policy and insurer in an objective manner and leave the final decision to you. Buy life insurance online The convenience of the internet makes it a popular tool for life insurance shopping. The internet can help you research insurers and their policies, compare quotes, connect with agencies, and even buy term policies online. With all the advantages of convenience, keep these pitfalls in mind: Seeing unrealistic quotes Sharing contact information Buying from limited online options Seeing unrealistic quotes Often insurance quote websites and even some insurers will show the lowest premium rates available. These quotes may not be the rates that most people qualify for. If you are seeing surprisingly low rates, approach these numbers with some skepticism and anticipate that your actual rate will be higher. If you're using a quote website that asks for some underwriting information (e.g. age, gender, health, and tobacco use) before it shows you quotes, you can have more confidence in these numbers. Two online insurance agencies have a strong commitment to providing potential clients with realistic quotes: Quotacy and Policygenius. This commitment is one reason these companies are worth using as part of your life insurance research and purchase process. Even if the final rate is not the exact quote you received, it will usually be close to the mark. Sharing contact information Before you share your contact information with any website, you should know how the site uses the information you provide. Do they keep it confidential? Do they send your information to many insurance companies? Do they only send the information to the company you asked about? Understanding how sites use your information will protect you from getting a crazy number of phone calls from salespeople trying, as they may say, "to earn your business." Fortunately, whether you are comparing companies or looking for quotes, there are sites that respect your information including Best Company, Quotacy, and Policygenius. Best Company doesn't offer quotes. However, you can read customer reviews and see how companies rank against each other based on industry criteria and customer reviews and ratings. If you choose to use a company by clicking on a Best Company "Visit Site" button, the only company that will receive that information is the company you selected. We save you the frustration of unending sales calls in this way. On Policygenius and Quotacy's platforms, you do not have to provide contact information before you can view quotes. If you decide you want to work with either company, you can share contact information with them after you see quotes. Quotacy agents keep your information anonymous as they work with insurers to find a policy that best fits your particular needs with a favorable underwriting process. This practice offers an additional layer of security as Quotacy shops around to find the best life insurance options for you. Policygenius also only shares your information with the insurer you applied for through its platform. Buying from limited online options If you're mainly using online resources to connect with reputable agencies and view quotes, you're not buying from limited options. However, if you're planning on completing an online application and purchase in the same sitting, you cannot buy a permanent life insurance policy and you're limited to a few kinds of term policies. "When you buy online, you're limited to the simplified issue and guaranteed issue policies, which are quick and easy to buy but don't involve much underwriting. This is usually bought by people who have medical conditions, so they are much more expensive. That means you won't get the best rate because the insurance company will charge you the same as these unhealthy people. Although it will take longer, the best route to go when buying term life insurance is through an insurance agent. You will go through underwriting and get the best rate available," says Brian So, life insurance agent and Brian So Insurance founder. Online policies are also not as customizable as policies bought through more traditional methods. "There are a string of fintech insurers that can issue term life insurance policies online, including Bestow, Ethos, and Haven Life. They offer a quicker buying experience and your coverage might go into effect instantly — but just know you may not be able to add riders to your policy,” says Iervasi. If riders are important to you, then buying life insurance online may not be the best way to go. You should also keep in mind that some of these companies are new, so don't have a lengthy time in business to demonstrate their longevity. Before you buy from these companies, make sure you understand how they protect the policies people buy — Is the company a subsidiary of a trusted insurer? Does the company have insurance on its life insurance policies? "An increasingly popular model is where a life insurance company develops specific policies for the non-medically underwritten marketplace and re-brands the site with all new products. You see this with Haven, for example, which is owned by MassMutual," says Acker. Another similar example is Bestow. Bestow's policies are from North American Company for Life and Health Insurance ®, which has earned high financial strength ratings. These policies are also reinsured by Munich Re. Even though Bestow is a new company, you can buy confidently from it because of the steps it has taken to ensure its ability to meet claims obligations. While these new companies can be trusted, buying life insurance online isn't a great fit for everyone. Raquel Murphy, HUB International Northeast Vice President of Individual Life insurance offers a few examples: "Buying term life insurance online seems easy and convenient unless you have a problem. There will always be an agent behind the machine that you are referred to if you don’t meet the narrow criteria for applying online. If you have a medical condition or have a family history of medical conditions, purchasing on the internet may not be for you. Also, if you are purchasing very large amounts of term insurance, then you should probably speak with an agent." What's the verdict on online life insurance shopping? It can be a great tool for researching policies and connecting with agencies or insurers. However, applying and buying life insurance instantly is not for everyone because the options may be limited, you may not qualify, or you may overpay on premiums. Choose the best method As you consider your options for buying life insurance, you should consider the pros and cons of each and which would make the most sense for your situation. Working with a life insurer cuts out the middleman and establishes a connection to the insurer that you can contact as you need to make changes to your policy beneficiaries or update your address. However, the life insurer will only show you policies that they offer. If you choose an insurer without understanding how they approach underwriting certain conditions, you may pay higher premiums than with another insurer. If you want to explore your options at multiple top insurers, working with an independent agent or life insurance agency is a great choice. Agents represent multiple life insurers and can help you find the one that offers the most favorable underwriting for your situation. This is another advantage of working with an agency, especially if you have medical conditions that would affect underwriting. You can also connect with some agencies online to buy term or permanent life insurance policies. Quotacy and Policygenius are good examples because they allow you to view quotes without providing contact information and, in many cases, start the application process online. Licensed agents are also available to help you as you navigate the application and purchase process. As you consider purchase methods, you don't have to worry about being given a different price for the same policy from the same insurer whether you work with an agent or with the insurer. "Seeing as insurance laws do not allow for premiums to be greater when an agent is involved we recommend utilizing an agent that specializes in planning to ensure the policy fits into your overall strategy," says Todd Burkehalter, Drive Planning CEO. If you want to apply and buy a life insurance policy online in one sitting, you're limited to some kinds of term insurance. Convenience is a huge advantage of these policies, but they're not for everyone. If you're trying to get the lowest premium or have health conditions that affect underwriting, you'll want to choose another purchase method. However, if you're in good health and just want to check life insurance off your to-do list, there are reliable companies to choose from, including Bestow and Haven Life. Whichever way you choose to approach life insurance shopping, be sure to avoid pitfalls and choose an insurer with high financial strength ratings. "Insurance companies are heavily regulated and among the least likely institutions to go under, so I advise clients to not worry as much about which particular carrier they work with so long as they are A-rated by A.M. Best or the other ratings agencies. This information is readily available on a company's website and pretty much all you need to know," says Jake Tamarkin, Everyday Life CEO and cofounder. High ratings indicate an insurer's ability to manage its finances wisely and meet claims obligations. If an insurer has unpublished or low ratings, it's best to choose another company. Buying life insurance will give you peace of mind and help your loved ones be financially prepared for the future. Want to know more about the pros and cons of life insurance agencies and quote comparison websites? Read: "Life Insurance Brokers vs. Quote Comparison Websites."
No one wants their friends and family to inherit financial difficulty. Life insurance can go a long way in alleviating financial stress, from paying for a funeral to replacing a lifetime of income. You want to leave your family financially secure at an affordable price. Premiums and coverage are what you'll look at as you compare policy options from trusted life insurers. First, we'll take a quick look at life insurance rate classes, then move on to cover some of the biggest things that can affect your premium rate, and finish with additional advice from experts. Rate classes Life insurers have 14 to 16 classification levels that determine premium rates. The rate classes with the lowest risk include the following: Preferred Plus or Preferred Best Preferred Standard Plus or Standard Select Standard If you have a higher than standard risk, the rate classes extend into tiered tables that are either numbered or lettered in order. Table 1 is the least amount of additional risk. “Some companies go down to a table 12, while most will decline after table 10. The closer you are to Preferred Best, the lower the premium you will pay. Every table rating increases your premium by 25 percent. For example, a table 1 will be standard + 25 percent, table 2 will be standard + 50 percent, etc.” says Chris Abrams, Abrams Insurance Solutions owner. Your premium rate is determined based on what classification you reach based on underwriting. Through the underwriting process, the insurance company will review your application, health, lifestyle, and a few other factors to determine the risk of insuring you. Once the underwriting is complete, you’ll know whether your application has been approved or declined. If you’ve been approved, you’ll also get the final premium rate. If you think you may have higher than standard risk, don’t worry. You may be able to find an insurer that handles your situation well. “Some companies offer 'table shaving' which means they will reduce the amount of tables if you have other favorable underwriting factors,” says Abrams. Premium rate factors There are many things that affect your premium rate. Before even getting to the underwriting process, the amount of coverage and policy type affect the rates you’ll see and the level of underwriting you can expect. “The death benefit amount you choose and the duration of your policy both materially impact your premium level. The greater your death benefit and the longer your policy period, the higher your premium will be,” says Andrew Chen, Hack Your Wealth founder. Longer policies aren’t just likely to cost more. They’re also likely to have more rigorous underwriting. “Whole or permanent life insurance policies tend to be more expensive and an insurance carrier is going to want to know about more aspects of a person’s life. Short term policies for a lower amount may not require as much information. It really depends upon the carrier and the type of policy,” says Walt Capell, Workers Compensation Shop founder. Another factor that can affect what you spend on premiums that isn’t part of underwriting is the payment schedule. “Most people pay monthly or quarterly premiums for their life insurance. Insurers typically charge a fee for the premium modes. Pay annually and it could reduce your cost by as much as 10 percent,” says Richard Best, Don’tPayFull.com personal finance expert. Some insurers may offer some flexibility on premium payment schedules. If you are a disciplined budgeter, opting for a bi-annual or annual payment schedule can make a lot of sense. Underwriting factors If you’ve done some shopping around, you’ve probably found that you have to provide some information about yourself before you can see a premium quote. “Life insurance rates are initially driven by three factors: age, gender, and tobacco usage,” says Doug Mitchell, CLU, Ogletree Financial Services owner. Once those factors are considered, more health, lifestyle, and criminal record information will be considered. “An applicants age, answers to health and lifestyle questions and their financial well-being are the biggest influencers in the underwriting process and will determine what the premium will be,” says Manny Lirio, Vantis Life Insurance Company, AVP of direct to consumer marketing. Here’s what experts had to say about age gender tobacco and other drugs driving and criminal record health lifestyle For more information on how life insurers find information on you, read Cameron Huddleston's Forbes article "How Life Insurance Companies Get Intel On You." Age Katia Iervasi, Finder.com insurance writer“Younger people almost always pay less for life insurance. The reason isn’t subtle: As you age, your life expectancy goes down, and the likelihood of your insurance company having to pay out your policy goes up.” John Holloway, NoExam.com founder and licensed agent“In 2019, NoExam.com conducted a life insurance pricing study. The study recorded the results of over 100,000 life insurance quotes, and it shows that the price of life insurance increases with age. On average, the price of life insurance is 65 percent more expensive at age 40 than it is at age 30, and it is 96 percent more expensive at age 50 than it is at age 40. The good news is that you usually require a shorter term policy at age 50 than at age 30. The bad news is that you will have a bigger payment to budget for each month.” Life Insurance Premium Price vs. Insured's Age Graph showing results of NoExam.com's study results. Image courtesey of NoExam.com. Back to Underwriting Factors Gender Laraine Sookhoo, OneHourBurialInsurance.com life insurance agent“Life insurance companies underwrite based on gender at birth.” Andrew Chen, Hack Your Wealth Founder“Women generally live longer than men, so they'll have lower premiums on average.” Katia Iervasi“Men are considered to be riskier drivers, so women tend to score lower rates.” Back to Underwriting Factors Tobacco and other drugs Katia Iervasi“To enter the top rate tiers, you’ll typically need to show you have no history of alcohol or drug abuse or treatment within the past 10 years.” Smoking Andrew Chen“If you smoke, you'll pay higher premiums because the risk of death within the policy period increases.” Alex Enabnit, TermLife2Go.com licensed agent and life insurance expert“One of the biggest considerations for your premiums is whether or not you smoke. Insurance companies are typically pretty hard on smokers (and even vaping gets included in this category). It’s not uncommon for a smoker to pay at least double the amount that a nonsmoker in the same health class would pay. The good news is, the longer you go without smoking, the more it can lower your premiums. Most insurance companies consider a person who hasn’t smoked in five years a nonsmoker — even if that person smoked for thirty years before then.” Laraine Sookhoo“Life insurance companies consider a ‘non-smoker’ as someone who has not had tobacco or nicotine products for at least 12 months. This would include nicotine replacement products like patches and gum. Of the ten insurance companies that I represent, none of them are asking specifically about electronic cigarettes, but some phrase the question to cover nicotine products and others do not. A couple of my insurance companies will give cigar smokers the non-tobacco price because they only ask about cigarettes.” Marijuana Emory J. Smith, Principal of EJS Financial Management “Marijuana use is a hot button issue in life insurance. Five years ago, almost no carriers would offer coverage for users of marijuana. Today, many carriers will offer excellent, non smoker rates for admitted marijuana users. In states where medical marijuana is legal, carriers typically underwrite based upon the underlying condition. Why does the proposed insured have the medical marijuana card? Underwriters will ask for copies of the card to prove legitimacy and often extend favorable nonsmoker rates to applicants. Some carriers go so far as to distinguish between smoking, vaporizing and using edibles. The frequency and method of marijuana consumption can change an applicant’s offer. By and large, many life insurance carriers still view marijuana in any form as an illegal drug and decline or highly rate coverage accordingly.” Prescriptions Emory J. Smith“Part of most insurance applications is a prescription drug database search on the proposed insured. Many clients don’t realize such a database exists where all prescriptions, dates and prescribing physician’s information is listed. Whether intentional or unintentional, this search can turn up additional medical information not previously disclosed. I had an applicant disclose back pain issues with ‘occasional’ use pain medication only to find six active prescriptions for the same intense pain medication on the database search. Needless to say, this rose to the level of abuse, and he was justly declined for coverage.” Back to Underwriting Factors Driving and criminal record Katia Iervas“Safe drivers are viewed more favorably by insurers. To score a cheaper rate, your driving record must be free of moving violations, DUIs and reckless driving in the past three to five years.” Richard Best, Don'tPayFull.com personal finance expert“Life insurers take a look at your driving record. Too many tickets or at-fault accidents may get you a higher premium rating.” Jared Weitz, United Capital Source CEO and Founder“If you have a criminal record, especially that of driving under the influence, your insurance policy will be more difficult to qualify for. The level of detail the process covers can be invasive, but is vital to getting adequate life insurance that matches your lifestyle.” Laraine Sookhoo“Lifestyle choices can affect pricing in that they force the buyer into a higher rate classification. Those with substance abuse issues, convicted felons, and those with a DUI in recent years may be denied or else approved at a higher rate. Since insurance fraud is always a concern and because life insurance policies are sometimes used to try to launder money, an insurance company might also deny an applicant if their reports indicate possible character issues that raise flags about these potential problems. They wouldn't affect price, though, just approval.” Back to Underwriting Factors Health Richard Best“The biggest factor in determining how much premium you pay for life insurance is your health condition and history. This factor includes your family's health history. Insurance actuaries determine which health conditions present the biggest risks and apply premium ratings accordingly. Each company applies different standards to assess risk, which is why it’s important to compare rates of different insurers.” Current health Adam Hyers, Hyers and Associates, Inc. owner and insurance agent“The number one factor in determining rates are conditions with higher mortality rates. Any conditions associated with an earlier death will be cause for higher premiums or no offer of insurance at all. Actuaries and underwriters are very careful with chronic conditions that may reduce someone's life expectancy.” Travis Price, licensed income protection agent“Obesity plays a major role in determining your rating class. The higher your BMI, the more likely that you're going to be in a higher rating class or even denied. This is true even if your health is perfect except for your weight.” Laranie Sookhoo“Life insurance companies care about the kinds of illnesses that will lead to an early DEATH. They don't care if you have medical issues that make you uncomfortable or affect your quality of life. So, things like back pain and knee pain are of no concern UNLESS these are issues because you have a disease like Lupus or MS. If your back or knee hurt due to an injury or arthritis, then it won't matter. Rheumatoid arthritis is a concern, however. Diabetes is not usually a problem if it is controlled, but if it is uncontrolled and the applicant has already experienced complications like an amputation or needing kidney dialysis, then that person will need to apply for a guaranteed issue policy.” Personal and family health history Andrew Chen“If you or your family has a history of illness that increases the risk of death during the policy period, you'll pay higher premiums.” Brian So, Brian So Insurance founder“Your medical history plays a huge role in qualifying for life insurance. If you've had major illnesses in the past (e.g. cancer), the underwriter would want to know more about it. He may gather more information from your family physician or specialist. If the underwriter determines that you are at a higher risk for death than the average person in your age range, it will add a rating to your policy or decline your application for coverage.” John Holloway“An applicant's health history is going to have the biggest impact on premiums. Any current or past health conditions can have an effect on the rate. Some things that people are often not aware of that can affect an underwriting decision are: past medications, current medications, driving record, family medical history, and medical history. These factors can cause the applicant to be moved into the next rate class, which will mean a higher rate. In some cases, applicants are declined for a combination of these factors. For example, untreated high blood pressure combined with a family history of heart disease.” Medical Exam Andrew Chen“You'll have to take a health exam as part of the underwriting process. Your health assessment from this exam will impact your premium.” Travis Price“For those cases that are fully underwritten, the medical exam has the most influence over the premiums you pay. In the event that you go to a simplified issues policy, the MIB (Medical Information Bureau) is vitally important. It gives essential information and prescription checks to determine eligibility and rating classes.” Back to Underwriting Factors Lifestyle Jared Weitz“Your health and lifestyle will play a large part of the underwriting process. If you’re an avid bungee jumper or travel to dangerous places often this will place a burden on your rate.” Job Andrew Chen“If your job is a risky or hazardous one (e.g. police, pilot, construction worker vs. office worker), then you'll likely face higher premiums.” Hobbies Brian So“Factors that negatively affect your insurance premium include participating in high-risk avocations like skydiving and heliskiing, use of narcotics, incarceration, and major driving infractions. These will all make the underwriter think twice before offering you insurance coverage.” Andrew Chen“If you have unnecessarily risky hobbies, like freescaling or skydiving, you'll face higher premiums.” Travel Emory J. Smith“Foreign travel to ‘safe’ countries for less than 183 days (six months) per year is generally okay. Foreign travel for longer than 183 days is typically categorized as Foreign Resident status which limits available rates at most carriers. As a rule of thumb, any country where the U.S. State Department has a travel warning is likely not eligible for life insurance through traditional channels. Foreign countries are rated with letters. A-rated countries such as China, Canada, France, United Arab Emirates allow for best possible rates up to 183 days of travel. Lesser rated countries like Iran and Ukraine are still eligible for coverage, just lower rates and shorter durations of travel. It goes without saying, but travel to countries with active conflict generally results in decline of coverage.” Back to Underwriting Factors Life insurance applications Applying for a life insurance policy can be intimidating, but understanding how the process works can make it less daunting to secure financial stability for your loved ones. Before you apply for a policy, make sure that you’ve explored your options and have found the right policy fit. You’ll also want to do your research to know when you’re working with a trustworthy life insurance agent and to choose a reliable insurer. Whether you’re figuring out which kind of policy is best for you or starting the application process, here are some extra tips that experts offered. Choosing the right policy Laraine Sookhoo“A term life policy is a good solution for parents of young children in the home because their goal is income replacement. Buyers of this product certainly hope that the term will expire without them needing to use it. (Just like we buy auto insurance and hope we never need it.) This is very different from someone who buys a final expense policy, who hopes that they still own the policy on the day they die because they want their heirs to have that money to help pay for their funeral and other end-of-life costs. Savvy business people often buy larger whole life policies because they can borrow tax free from the cash value accumulated to help them with their business or real estate goals. Some buy universal life policies in an effort to combine insurance and investing. If you are clear on the life problem you are trying to solve, it will help you determine which policy might work best for you.” Finding the right insurer Chris Abrams“There are hundreds of life insurance companies in the United States. Work with an independent agent who is familiar with how each company underwrites certain health conditions. That agent should be able to match you to the one company that will be most lenient for your particular situation and therefore will offer the best health rating/lowest premium.” Completing underwriting Scott Butler, Klauenberg Retirement Solutions financial planner“People should know that underwriting is usually, at worst, a very mild inconvenience. You may have to do a paramedical exam, but the insurance company will pay for it. Think of it as a free health check-up. The examiners usually have flexible appointment times and will usually come right out to you. When you are being asked questions about your medical history, pay attention to each question, answer truthfully and do not volunteer any extra information that is not asked for. If they want to know if your mother had a medical condition before age 65, there is no obligation or benefit for you to tell them about conditions your mother had after 65 or about conditions of your sibling.” Walt Capell“Each carrier has their own formula for how they determine if they are going to offer coverage and how much to charge for that coverage. For most people, making small changes such as losing weight, quitting smoking or adopting a healthy lifestyle to lower your blood pressure and cholesterol can help lower premium when quoting a life insurance policy.” Earl Rubinoff, The Rubinoff Group president and CEO“A constant annoyance is when an insurance company receives copies of medical records of a person and there are notes in the applicants records that describe a recommendation for the person to go see a specialist or have a specific further medical test performed to rule out any issues and the patient hasn't followed through on this. This is a very simple item that the life insurance applicant can control. People have to realize the more information the insurance company has, the better the rate the person can get.”
Guest Post by Jenny Campbell, Member Benefits Team Leader at AAFMAA For military servicemembers winding down an accomplished career, there are many decisions to address to ensure you and your family are on the right track for post-military life. The financial decisions are among the most complicated and daunting aspects of pre-retirement planning — servicemembers must manage pay and benefits changes and transition from military-specific insurance offerings to civilian and veteran ones. The earlier you begin assessing your finances and planning, the better off you will be, so you can focus on ensuring your family is socially and emotionally prepared for the transition. If you’re unsure where to start when it comes to pre-retirement money moves, these three tips can help. 1. Protect your family in the long-term with survivor benefits At retirement, many servicemembers decide to elect the Survivor Benefit Plan (SBP) through their retired pay. How does this work? SBP replaces a veteran’s retired pay when he or she dies, meaning the spouse and/or dependent children will receive a monthly annuity equal to 55 percent of the retired pay. SBP costs the retiree 6.5 percent of their pre-tax retired pay every month. While this is something you hopefully won’t have to worry about for many years after retirement, the best time to have the conversation is prior to leaving the service. If you make an election to decline or reduce SBP at retirement, your spouse’s written approval is required. Take a moment to go over a few key questions with your spouse related to SBP. How financially dependent will your spouse be on your retired pay? Will he or she have another source of income (their own pension or retirement savings account, for instance) to draw from? Will the SBP annuity provide enough to keep your spouse and other dependents financially secure for the remainder of their own life or will you need to explore supplemental life insurance plans? Lastly, don’t forget to always keep your records up-to-date. This means alerting Defense Finance and Accounting Service (DFAS) promptly of any life changes such as divorce, death or remarriage which may impact your SBP beneficiary. I’ve encountered instances where members remarry and fail to notify DFAS, resulting in their new spouse missing out on SBP benefits. 2. Research insurance products I mentioned supplemental life insurancebriefly. As you may know, all servicemembers lose their government-provided Service Group Life Insurance (SGLI) at retirement. There is a replacement option through the VA, Veteran’s Group Life Insurance (VGLI). VGLI does not require proof of medical insurance, making it a good option for retirees who have pre-existing health conditions. On the downside, VGLI premiums can increase rapidly with age and are often very expensive when compared to offerings from private and third-party providers. The best way to avoid overpaying or experiencing sticker shock when you see your new premiums is to spend time shopping around for life insurance prior to retirement. Ask for as many quotes as possible and compare plans with your family. Planning ahead means you don’t have to rush into a decision! You also need to consider health insurance in retirement. TRICARE for Retirees is available through the military and has two options — TRICARE Prime and TRICARE Select. The choice of plan depends on where you will be living in retirement and who you want your providers to be. Again, shopping around for plans and comparing coverage costs is crucial before making a decision. The retirees I talk to find the cost of TRICARE very competitive and, in some cases, lower than many plans available on the private market. One note: at age 65, a retiree must enroll in Medicare Part B to continue their TRICARE coverage through the TRICARE for Life plan. This plan has no premiums and works as wrap-around coverage after Medicare pays. 3. Organize your documents and records Some of the most important records you can prepare ahead of retirement are health records. Be thorough with medical exams before you leave the service and make sure to have any and all ailments or chronic issues documented in your military medical record as service-connected conditions. This applies to even the smallest issues. You might not be planning on filing a VA disability claim right away but, if a condition worsens, you’ll want it in your record so you can establish service connection with the VA. I encounter veterans in their seventies and eighties who are going through the tedious and confusing process of filing a VA claim decades after leaving the military. In addition to your health records, you’ll want to gather other important documents pertaining to your military service and estate plan ahead of retirement. Review your estate planning documents to identify any changes that need to be made. You can consult or make an appointment with the JAG office to update legal documents. If you’re considering setting up a trust, consult an estate planning attorney or financial advisor, particularly one with experience dealing with military members and veterans. Establish a safe location for your records, preferably one your spouse, executor, and any adult children can access, if needed. A fireproof safe in your home can be a good place. Go through each document with your spouse and any others who may be handling finances in the event of your death to make sure they can identify each item and understand its purpose. For instance, your spouse may need specific military and VA records when applying for survivor benefits. He or she should be able to locate your DD form 214 (certificate of discharge) and be familiar with your VA disability rating, if applicable, as these records can be crucial regarding future military and survivor benefits. When you’re planning to retire from the military, there are many decisions that will impact the long-term financial, social, and emotional well-being of your family. Fortunately, by addressing the financial planning tasks early on, you can rest easier and focus on ensuring your family is prepared to make this transition and enjoy post-military civilian life! Jenny Campbell is the Member Benefits Team Leader at The American Armed Forces Mutual Aid Association, the nation’s longest-standing military financial services not-for-profit organization. Read Best Company's side-by-side comparison of USAA, Navy Federal, and Navy Mutual life insurance.
Here are two scenarios you may face as an entrepreneur: Scenario 1You've got a great idea. You just need some funds to put it in action, make profits, and be a successful business owner and entrepreneur. The only thing standing between you and starting a business is some funding. SBA loans are a nice way to get funding. The Small Business Administration partially insures loans given by banks and other lenders. Because the loan is insured, the risk for the lender is lower. However, SBA loans require life insurance for the business owner can take on the loan. The death benefit from the life insurance policy would cover the remaining balance of the outstanding loan. Scenario 2You realize that most of your business’s success depends on you, your business partner, or one of your employees. If that person gets sick or passes away, your business would be negatively affected. Depending on your business goals and the kind of business you have, you may want to purchase key person insurance that will help your business stay solvent, recover from the loss, or pay employees severance as the company closes. As you start your business, you may also want to consider key person life insurance that can help keep your business solvent in the event that a person directly tied to the success of your business passes away. Whether you're looking for key person insurance or life insurance for loan collateral, here's what you need to know about how much to buy and what kind of life insurance to buy. How much life insurance to buy Life insurance coverage is the cash the insurance company pays you when you make a claim. This is called the death benefit. When you're determining how much to buy, think about how much you would need for expenses if the insured person were to pass away and the purpose of the life insurance policy. SBA loans For SBA loans, you'll need to have enough to pay off the balance of the loan as required by the lender. “The first step is to consult with your loan officer at the bank writing your SBA loan. The loan officer will know the specific requirements for the life insurance policy you need. Typically, the lender will require a 10-year or 25-year term policy with the death benefit that is the same size as the loan. You should also find out your closing date to help the insurance agent determine when the policy needs to be in place by. With this information, you can then move on to choosing a life insurance policy,” says Jason R. Hill, FSS Client Focused Advisors CEO and financial adviser and Life Insurance for SBA Loans founder. Keep in mind that you may need life insurance policies for your business partners if you’re not the sole founder. “In the case of business co-founders or multiple principle revenue-creators, you likely will need a policy on each person,” adds Jason Fisher, BestLifeRates.org CEO and founder. Once you know how much life insurance the lender requires, you’ll be prepared to work with the life insurance company to find a policy that meets your needs. “Often life insurance policy terms and amounts won't precisely match what you need, so you'll want to choose a larger coverage amount and longer term than the SBA loan. That way, in the tragic event the policy does need to be used, any additional amount above the loan repayment amount will go to whomever you name as an additional beneficiary. If you pay off your SBA loan before the end of your life insurance term, you can usually cancel the policy to avoid continuing to pay the premiums,” says Fisher. As you’re weighing life insurance policies, verify with the insurer how much of the loan they’ll cover in the event of a claim. “The biggest thing a business owner should look out for are the rules regarding the collateral assignment. Most insurance companies will only cover 80 percent of the loan which won't be enough to satisfy the lender. So make sure when you apply you confirm with your life insurance agent that the life insurance company will cover the entire amount,” says Jeff Root, owner of Rootfin.com. If you’d like to purchase additional life insurance to take care of your family’s needs, you can purchase more life insurance with the single policy or a separate life insurance policy. Once you have the policy and are approved for the loan, the last thing to wrap up is the collateral agreement. “The most important part is getting a collateral assignment form signed off on by the lender, borrower and life insurance company. This makes so as you pay down the loan, the life insurance will only pay what’s left on the loan and pay the rest to your beneficiaries,” says Root. Key person insurance “Key person life insurance reimburses a business for lost income when the owner or key executive in the business passes away. The business purchases the policy on the life of the owner or key employee. This type of insurance is especially critical for businesses in which one or a few people are responsible for the business's income,” says Priyanka Prakash, Fundera business finance expert. This kind of insurance is important for people applying for an SBA loan. However, it’s also important to recognize that you may have other employees that play a key role in your business’s success that may be difficult to replace. “For example, the owner might have the bulk of the technical expertise or bring in the majority of sales leads. In this case, key person insurance helps to ensure the continued success of the business if that key person passes away. SBA lenders look for factors which will aid in the continuity of the business, so having this type of life insurance this can help an applicant qualify for an SBA loan,” adds Prakash. Depending on the purpose of the key person policy, the amount you purchase my vary. Are you trying to offset the costs of replacing this person? Are you trying to protect revenue and profits while replacing this person? Are you trying to keep your business’s cashflow stable while it recovers from the loss? Knowing your purpose will help you know which costs to consider and how much coverage to buy. In most cases, you’ll want to consider what the revenue and profit loss would look like without this person, the person’s salary and bonuses, and how expensive the hiring process would be. Key person life insurance is a wise investment if your business would struggle if a team member passed away. However, life insurance does not offer disability coverage. “While life insurance is the main focus of some brokers because of the commission, keep in mind that there is a four times greater chance between the ages of 50 and 60 for a person to become disabled long-term that to die. Therefore, disability coverage that is of the 'key man' type (pays a lump and/or termed payment to replace key talent and keep the business running until the owner or key person can return to productivity. These policies should be a matter of negotiation, rather than just caving to a demand or automatically offering; they obviously sweeten the deal for a previous owner providing owner financing and they reduce risk for other lenders,” says Dan Gallagher ScoreSense personal finance expert. What kind of life insurance to buy Life insurance falls into two main categories: term life insurance and permanent life insurance. Term life insurance only offers coverage during a specific period of time, usually between 10 and 30 years. Permanent life insurance has no expiration date as long as you make premium payments. Keep in mind that if you stop making premium payments, you’ll lose the coverage. Jacobitz Wealth Management Group financial adviser Robert Forrest offers some helpful tips on choosing between a term and permanent policy: “As a general principal, one could say that people need term life insurance for temporary situations and permanent life insurance for permanent situations. For example, things like debt or replacing income are temporary matters; once the debt is paid off you no longer need to insure it. Once you stop working, you no longer need to replace your income. But if you want to guarantee you leave a $1,000,000 legacy to kids or a charity? That’s a permanent life insurance situation.” While there will be some situational differences as you approach this decision from a business perspective, distinguishing temporary and permanent coverage needs will help ensure that you find the right policy fit. SBA loans SBA loans are temporary needs because once the loan is paid off, you no longer need life insurance as collateral. “Getting an SBA loan takes a bit of work. The process of obtaining a life insurance policy as collateral for the loan is one of the many hoops an entrepreneur will need to jump through in the process. For this reason, most people want the quickest, cheapest form of life insurance to satisfy their loan requirements. That option is almost always term life insurance,” says Alex Enabnit, TermLife2Go life insurance expert. Most life insurers offer term life insurance. Depending on your needs, you can find guaranteed policies or policies with accelerated underwriting. Guaranteed policies tend to be more expensive because they premiums are set. You may be able to qualify for lower premiums on a policy with underwriting if you’re in good health. Some term policies have decreasing coverage. This option can be tempting, especially since the coverage you need for your loan decreases as you pay it off. “I do not recommend any kind of decreasing term life insurance products because they tend to cost more,” says Fisher. Purchasing life insurance can be daunting. It’s easy to become overwhelmed by industry jargon. And, with the busy life of an entrepreneur it can be tough to make time during the day to meet with a life insurance agent. Some companies, like Bestow, make it easier by allowing you to purchase term life insurance online. This makes buying life insurance a simple process once you know what you need. Key person insurance When choosing between a term life insurance policy or a permanent one for key person insurance, it can vary based on company needs. Keep in mind that key people may decide to take a job elsewhere and will eventually retire. Term life insurance is also cheaper, so it can make sense to go that direction instead of another. If the key person is going to be with the company in the long-term, permanent life insurance may make sense. In some cases, these policies can be transferred from the business to the individual insured. Life insurance for entrepreneurs Keep in mind that life insurance for your business is there to protect your business. Life insurance for your family or beneficiaries is to protect your beneficiaries finances. These are two different purposes. Depending on how you’ve set-up your business, you may want policies to serve both purposes or just need a policy to protect your family. Working with a life insurance agent can help you understand your options and find the best fit for you. Choosing a trustworthy life insurance company will also ensure that your beneficiaries will be paid when they make a claim. Bonus: Expert tips on life insurance for entrepreneurs Finding the right fit Jason Fisher, BestLifeRates.org CEO and founder“Finally, whether you have only one policy that covers your business loan and has an overage for your beneficiaries, or you have two separate policies, really depends on the needs of your beneficiaries. If you were to pass away, would the amount be enough after the loan is paid off first? Remember, the loan becomes the first beneficiary and your loved ones become secondary.” Jason R. Hill, FSS Client Focused Advisors CEO and financial adviser and Life Insurance for SBA Loans founder“Once you determine the right carrier that fits you, the final step is to review your needs. If you do not currently have life insurance, this may be the perfect time to secure additional coverage for your family. You can buy one policy to fit your needs. It's is a myth that you need two policies. For example, if you were required to have $1,500,000 as the SBA life insurance requirement for 10 years. You instead can purchase $3,000,000 for 20 years to fit the needs of your family. If something were to happen to you, then the bank would get the balance of the loan and the primary beneficiary would receive the remainder. Additionally, you could consider all other term lengths, or lifetime coverage such as universal or whole life policy. Once the SBA loan is paid off then the policy is owned 100 percent by the owner and the collateral assignment is removed. One reason to keep it separated is on smaller policies if you want to go through the no-exam or accelerated process if you have a short closing window.” Protecting your business and your family Robert Forrest, Jacobitz Wealth Management Group financial adviser“When advising business owners on finances, we always recommend keeping them as separate as possible. Even if you’re a sole proprietor just getting started. It’s wise to keep business and family finances separate. That includes debts, cashflow, and insurance. Let your business income (and checking accounts) pay for your insurance for your business.” Brian Cairns, ProStrategix Consulting CEO“If you are not a sole-proprietorship, you probably don’t need to take out two policies. If you are a sole-proprietorship, you may want to consider two policies since your family’s assets are at risk if you default for any reason, including disability, death, etc.” Luis Avalos, Deductible Funding Solutions, Inc. COO“Setting aside a life policy for the SBA loan and purchase a separate policy to protect their family in the event of an unfortunate circumstance is a great option. Entrepreneurs should not only consider but always name the lender as primary beneficiary for the one term life policy associated with the SBA loan. Entrepreneurs should also be aware that SBA loans for business tied to an individual or individuals do require life insurance to protect the lender. Our lives can change from one day to another. Please keep your options open and protect your assets.” Forrest“If you’re starting a business with one or more partners, please, please, please be sure to set up a buy-sell agreement and fund it with life insurance. A buy-sell agreement is a legal contract that requires the other owner(s) to buy out the portion of an owner when they die or become permanently disabled. Otherwise, your ownership of the business goes to your spouse and the people who went into business with you, may not want to go into business with your spouse. The most cost-efficient way to fund a buy-sell agreement is with insurance.”
Guest Post by James Taylor Finding the best provider for life insurance and other avenues of insurance (health, business, auto, etc.) is becoming increasingly difficult. This is especially true with pre-existing conditions and family history factors. Health care is an enormous focal point of our decision making when it comes to careers, food choices, and political matters. But there is one growing trend causing significant changes in the insurance industry: Veganism. Here are six reasons why you can expect that trend to continue, and what that means for insurance companies: Staying power From 2014 to 2017, the percentage of people in the U.S. population alone who claimed to be vegan rose from 1 percent to 6 percent. That will likely continue as the global, plant-based “meat” market grows exponentially over the next five years. The vegan market value was $51 billion in 2016, and it doesn’t look to be slowing down any time soon! Insurance costs less The top five most expensive health care costs provided by insurance companies are high blood pressure, heart disease, cancer, diabetes, Alzheimer’s disease. All of these are seen less in individuals with an entirely plant-based diet. One insurance company, HealthIQ, is already making cuts to insurance prices specifically for vegans looking to purchase life insurance. Here are five reasons some companies are changing how they look at delivering healthcare services to the growing vegan community: A 2016 study of 56,000 vegans showed that vegans have a 15 percent lower risk of all types of cancer, a 34 percent lower risk of female-specific cancer, and a 22 percent lower risk of colorectal cancer. A 2012 study showed vegans have a 63 percent lower risk of hypertension than non-vegetarians. A 2009 study showed vegans have a 49 percent lower risk of Type 2 diabetes. The Journal of the Alzheimer's Association produced a study that showed a diet full of fruit, green vegetables, berries, and fiber is associated with a 53 percent lower risk of Alzheimer's, especially in those predisposed to the condition. A 2013 study showed vegans have a 9 percent lower risk of cardiovascular disease. Almost zero food allergies It’s almost unbelievable that 90 percent of food-related allergies stem from reactions to milk, eggs, peanuts, tree nuts, fish, shellfish, wheat, and soy. Of course, this doesn’t account for the diseases that are caused by the consumption of those products over a lifetime as stated previously. One in 13 children have food allergies in the United States, with a 50 percent increase in food-related allergies from 1997–2011. Cher Pastore, an author, registered dietician, and owner of CherNutrition, said that heart disease, the number one cause of death in the United Sates, was nearly nonexistent in populations that adhered to a whole foods plant-based diet. She had the following to say regarding a plant-based diet’s effects on diabetes, a disease which cost a total of $245 billion in the United States seven years ago in 2012: "In my opinion, a whole food plant-based diet is one of the healthiest diets you can follow. Clinical research studies have shown that adopting a low-fat, plant-derived diet can aid in weight loss, improve insulin sensitivity, reduce blood sugar and cholesterol, and reverse a type 2 diabetes diagnosis. The American Academy of Nutrition and Dietetics and the American Diabetes Association both now recommend well-planned, plant-based (vegetarian and vegan) nutrition for people with diabetes." The Vegan & Animal Professionals Insurance Agency (VAPI) was established in 2016 solely to provide services for ethically and environmentally sound businesses that create sustainable and healthy products and services. As companies start popping up to deliver services to those participating in the vegan lifestyle, it’s important to get the most up-to-date information on insurance, especially life insurance. Top health care provider acknowledges benefits One of the United States’s largest non-profit health care providers, Kaiser Permanente, made waves in their peer-reviewed journal, The Permanente Journal, which has a viewer base of over nine million subscribers. The health care provider defined a plant-based diet as one that encompasses and encourages consumption of whole, plant-based foods while discouraging the use of meat products, dairy products, and eggs along with all refined or processed foods. Groundbreaking studies from a non-profit healthcare company serving over twelve million people since 1945 are sure to bring change to our thoughts about health and how health care is provided moving forward. Top corporations participating in vegan initiatives Vegan Leaders in Corporate Management (VLCM), started by Darina Bockman in 2014, is a unique platform designed to help vegans working in large corporations advance plant-based initiatives in their respective workplaces. VLCM boasts 2,300 members, a third of them working at Fortune 500 companies and a little over 200 working at Fortune 100 companies since its creation five years ago. Participating companies include juggernauts like Amazon, American Airlines, American Express, Apple, AT&T, Bank of America, Best Buy, Boeing, Citibank, Coca-Cola, Dropbox, ExxonMobil, Facebook, General Electric, General Motors, Hewlett-Packard, Home Depot, IBM, Intel, Microsoft, Morgan Stanley, Nike, Target, UPS, Verizon, Walmart, and Wells Fargo. This means a big change from unhealthy diets and lifestyles is already underway as the biggest companies in the world take part in healthier workplace initiatives. Of course, with all of these businesses taking the initiative toward veganism in their office culture, people are seeing benefits in their insurance costs. Knowing all the different types of life insurance, for example, is just one of the ways you can stay better informed while lowering your monthly premiums. Joshua D. Erdei, a Global Wellness and Voluntary Benefits manager for GM, conducted 10 plant-based events in a two-year span with the help of The Plant-Based Nutrition Support Group (PBNSG). Three hundred GM employees attested to having a “positive” experience when learning about whole food plant-based diets. Fewer sick days and increased productivity Happy, healthy employees take fewer sick days, have lower insurance costs, and are more productive. Jim Glackin, the Vice President of Strategic Partners, worked with CenturyLink to help them reduce insurance costs using the McDougall Wellness Program, an in-depth eight-day plant-based learning program sponsored by the employer for each employee. This program helps employees discover the benefits of the lifestyle and transition to a plant-based diet. CenturyLink has put around 300 employees through the program since 2015, and they said the overall health costs associated with those who participated in the McDougall Wellness Program decreased by around 32 percent. While 99 percent of participants stated they had definitely made health changes after the program, the biggest change CenturyLink saw was in a seven-fold return on investment! Expect the trend to continue upwards for the plant-based community as more insurance companies and employers look to make adjustments toward a healthier population. James Taylor is a writer for EffortlessInsurance.com and has been vegan since 2015. In the fitness industry for 20 years, he’s played collegiate football, tennis, and had a seven-year amateur MMA career. In his last two fights, he fought as a vegan, and now currently resides in San Diego, California.
Guest Post by Jason Fisher Life is filled with the unexpected. When you buy life insurance, you can rest assured knowing your loved ones are protected no matter what happens. While most people agree they need life insurance, there is an age-old debate about which type of policy is best: term life or whole life. Although the concept of permanent life insurance is appealing, is it worth the cost? And do the benefits of term life insurance make it the best choice for everyone. To decide whether term or whole life insurance is right for you, you need to identify your needs and understand some key differences between the two policies. What is term life insurance? Let’s start by breaking down term life insurance. Term life insurance offers coverage for a certain period, or term, of life. These policies come in terms like 5, 10, 15, 20, and 30 years. If you’ve faithfully made payments and pass away during the term, your beneficiaries will receive the death benefit, or face value, of your policy. Your premiums and the face value are locked in for whatever duration you choose. Once your term is up, though, rates on a new term policy may change based on your age and other risk factors. Key considerations for term life insurance Cost — You can purchase large term policies with considerably lower premiums than whole life policies of the same value, saving tens of thousands of dollars over your lifetime. Flexibility — Term life insurance is designed with life’s changes in mind. It’s made to cover your temporary needs, allowing you to save money and tailor a policy to your current circumstances. Simplicity — Term life insurance policies are uncomplicated. As long as you pay your premiums, the policy will stay in effect for the length of the term. Temporary policy — The only true downside to term life insurance is its lack of permanence. Term life insurance is intended to meet your temporary needs and ensure your loved ones have protection when they rely on it most. Conversion — Keep in mind that if you find you need long-term life insurance later in life, you can sometimes convert your term life insurance into a universal or whole life policy. When to buy term life insurance Here are a few situations when term life insurance is a good fit: College education — If you’re looking to secure your 6-year-old’s future college education, a 15-year term life policy could do the trick. Mortgage — If you and your spouse are knee-deep in a 30-year mortgage, a term life policy could ensure your family’s home is paid for. Debt — If you’ve accrued debt which could be transferred to your loved ones, you could purchase a term life policy for the length of time it will take to pay them off. Income replacement — If you have dependent children or want to see your spouse through to retirement, a term life policy can replace your income. Budget — If your long-term goal is to secure whole life insurance but you’re on a budget, term life insurance provides you with an affordable solution which you can convert to a whole life policy later. Whatever your situation, you can base the terms of temporary life insurance around your family’s ever-changing financial needs. Buyer's Guide: Term Life Insurance Download our free guide to learn more about term life insurance, how to decide if you need it, tips for choosing a life insurance company, and customer reviews. Download Guide What is whole life insurance? Unlike term life insurance, whole life insurance is permanent. True to its name, whole life insurance is designed to provide protection for the entirety of your life, rather than a specific period. In addition to the length of coverage, there is another key difference between term and whole life insurance: cash value. Whole life insurance is considerably more expensive than term life insurance, because it offers more than just a death benefit your loved ones will receive in the wake of your passing. Your premiums also go towards the policy’s cash value, which grows tax-deferred over the years. You can also borrow money from the cash value, much like a retirement account. Just keep in mind that you’ll have to repay the loan with interest to keep the full death benefit of your policy intact. You are also entitled to the policy’s cash value if you ever have to surrender your policy. Key considerations for whole life insurance Cost — Whole life policies are expensive. You could get more than double the amount of coverage with significantly lower premiums by opting for term life coverage. It’s crucial to keep the cost of life insurance policies in mind. Guaranteed cash value — The cash value comes with a guaranteed minimum growth rate. Whether or not life insurance is the most rewarding investment is debatable, but the policy does come with certainty. Death benefit — Your death benefit is guaranteed; however, it can be used to repay outstanding loans drawn from the policy’s cash value, decreasing the amount of money your beneficiaries receive. Level premiums — While premiums are considerably high, they’re guaranteed to stay the same for the duration of your life, a comfort to aging policyholders and individuals with declining health. When to buy whole life insurance Term life is a no-brainer for most families, but whole life insurance may be better suited to some people’s needs. Consider whole life insurance for the following: Estate planning — If you’ll be leaving behind an estate of more than $11.4 million, your heirs will be responsible for estate taxes to the IRS. Whole life insurance can cover the cost. Additional investing — If you earn a high income and need life insurance, you might want to invest in a whole life policy, especially if you’ve maxed out your 401(k)s and Roth IRAs. Special needs — If your spouse, child, or other dependent will need lifelong care due to special needs, a whole life insurance policy could secure their well-being after you’re gone. The bottom line As you can see, there’s no one-size-fits-all solution to life insurance. While the benefits of term life insurance make it the best fit for most people, everyone’s situation, financial needs, and goals are different. Sometimes, people need the permanence of whole life insurance. Whatever type of life insurance you decide on, don’t delay making this all-important purchase. Life insurance is one of the most concrete ways you can protect your family, and there’s no time like the present to get a policy in place. Jason Fisher is the founder and CEO of BestLifeRates.org, and a highly-trained life insurance agent licensed across the country. He has helped thousands of families find affordable life insurance, from basic plans up to comprehensive estate plans, and everything in between.
43 percent. That's the percentage of women without life insurance coverage. Life insurance is an important way to protect your family's finances. Millennial women are in their twenties and thirties, so they have some unique concerns and challenges to take into account when purchasing life insurance. Like other Millennials, Millennial women are dealing with high amounts of student debt. Younger Millennials may just be starting their careers. Older Millennial women may have mortgages or even families to care for. Because women in their twenties and thirties are at different points in their lives, they sometimes have different circumstances to consider. However, considering your current life situation and balancing it with future plans will help you identify what kind of life insurance works best and how much coverage you need. If you're a Millennial woman, here are answers to the following six questions you might have about buying life insurance with answers from finance experts: What kind of life insurance policy is best for Millennials? What questions should I ask when buying life insurance? When is the best time to buy life insurance? Are there cases when it's best not to buy life insurance? What should I know about the underwriting process? Any other advice? What kind of life insurance is best for Millennials? There are three main kinds of life insurance: term, whole, and universal. Within each category, there are variations. Final expense insurance, for example, is a kind of whole life insurance. Universal life insurance policies can also be indexed universal or variable universal policies. “Millennial women have many choices in the marketplace, and what they select should be driven by the amount and type of coverage needed based on their personal situation, how long they anticipate holding the policy, and the premium amount they would like to pay," says Jan Dubauskas Vice President at HIIQ, the parent company of Agilelifeinsurance.com. As you evaluate your life insurance options, keep what you need at the forefront. Lorena Tomasini, owner of MALM Life and Health Insurance Agency, offers a few examples: “Each case is different and this isn't a one-size fits all. It really depends on what you are looking to protect with the life insurance. If it's a temporary large asset, such as a mortgage, then a term policy would work. In other instances, maybe you’re a business owner and need protection in case something happens to you or your business partner. Then a permanent policy would be better because it builds cash value that can be used at any time. A permanent plan can also be used to supplement retirement incomes, in case of an emergency, to pay off a mortgage sooner or realistically for anything you need the money for.” Some employers offer life insurance as part of their employee benefits packages. Taking advantage of this is a great way to get life insurance coverage at low premium rates. However, employer-provided insurance offers coverage only while you have the job. For your peace of mind, consider purchasing your own life insurance policy. “I often recommend a small whole life or universal life insurance policy. You want a policy that is going to stick with you, no matter what job you have, where you move or how long you live. These types of policies offer the flexibility that a millennial woman needs. With so many moving parts in their lives, they want something that can move with them,” says Tiffany Welka, financial advisor and accredited wealth management advisor at VFG Associates. While a permanent life insurance policy will last a lifetime as long as you consistently pay the premiums, premium rates tend to be much higher for permanent policies than term policies. If you’re just starting out on your own, it may make more sense to purchase a term life policy depending on your situation. “Typically, it's recommended that those getting a life insurance policy start off with term life insurance. Often, those who choose permanent life insurance surrender it after 10 years or so because they can't keep up with the payments,” suggests Jacqueline Devereux, finance blogger for SproutCents. It would be nice if there were a simple answer, but finding the kind of life insurance policy that will best meet your needs will help ensure that you have the coverage you need. Buyer's Guide: Term Life Insurance Download our free guide to learn more about term life insurance, how to decide if you need it, tips for choosing a life insurance company, and customer reviews. Download Guide What questions should millennial women be asking when deciding to buy life insurance? As you consider buying life insurance, it’s important to ask yourself questions about your personal needs and your policy options and features. Here are questions that experts identified as ones you should ask: Personal needs Understanding your coverage needs by evaluating your financial situation, including debt, savings, and dependents. Weigh current and future needs Welka answers this question: “How much life insurance do you need now? Oftentimes, people are not sure what they are trying to use life insurance for. Is it to cover a debt? Is it to pass along to beneficiaries? Knowing these numbers will allow the professional to assist you in figuring out how much insurance is needed now. How much life insurance may you need in the future? Do you plan on starting a family someday? Purchasing a home? These are questions to consider when figuring out how much you may need in insurance at a later date. Many times, the younger and healthier you are, the less expensive the premium payments will be. Anticipating your future needs and paying for them based on your age now could save you money versus purchasing that amount of insurance at a later date.” Think about assets and dependents Dubauskas advises, "Millennial women should consider: what assets they are protecting? Do they have any children who would benefit from life insurance? Do they have any outstanding debt? Does the family have sufficient ready-cash for burial services? The answers to these questions will help shape how much life insurance is needed.” Learn about your debt Stephanie Bousley, personal finance author and consultant adds “Before you start paying for life insurance, first research the death policies around existing debt in your state. In some cases, it makes more sense to change some of the policies around your existing debt than to pay for life insurance. The specific pieces of information you need are Are there ANY co-signers on any of your loans? If so, see how you can get them taken off. Do you live in a state with community property laws, that require a surviving spouse to be responsible for any debts incurred during the marriage? If so, were any of your debts incurred during the marriage? What are the death policies around any extra debt? Generally, authorized users on credit card accounts are NOT responsible for the other account holder's credit card debt if that person dies. Auto loans are treated similarly, though the loan company does have the right to repossess the car if payments can't be made. Will your student loans be canceled if you die? Government loans are not necessarily, but if you refinance to a private loan company they usually will be. Obviously someone needs to read the fine print. When you die, your assets become your estate. The process of eliminating outstanding debts and distributing any remaining funds is called probate. During probate (which is usually a set amount of time, 1–3 years) credit card companies and other creditors can come after the estate to collect debt, but they are less likely to be able to collect from family members (aside from states with community property laws with married couples). Once you've educated yourself on EXACTLY what your family would be responsible for in the case of your death, re-evaluate the need to pay for life insurance. If your partner is gainfully employed, your debts won't be passed on to your family, you have no children, and no one is concerned about funeral costs, your money is probably better spent on debt payoff or retirement planning. If you have debt that other people would definitely be responsible after your death, life insurance is probably a good idea.” Determining needs by evaluating your finances and life goals will help make sure you buy the right amount of coverage. Policy options and features Once you have a sense of how much life insurance coverage you’ll want to buy based on your needs, the next step is to evaluate your life insurance policy options and available features or riders. Enrolling in workplace benefits Bousley says, “First and foremost, find out if your workplace offers any life insurance plan (either for free, as a result of being employed by the company or for a nominal rate). If there's a free option, definitely enroll if you haven't been auto-enrolled already." Buying your own “What type of life insurance is best for you? There is whole life, term life, variable life, universal life and indexed universal life. Understanding what each of the options are is going to allow you to choose the best policy for your needs" shares Welka. She adds, "Are there riders you can add to the policy to enhance it? A rider is something that is added to the policy — for instance, you may say if you have any future children, you want to them to be covered for life insurance with a death benefit of $5,000.00. Or, you may say if you become disabled, you want to make sure that you don’t have to pay your premium on life insurance policy because you won’t be able to work.” Exploring your policy and rider options will help you figure out the best fit for your situation. When is the best time to buy life insurance? Adulting is an adjustment. Buying life insurance can be overlooked as part of becoming an adult. And, since the life insurance death benefit is mostly for your family’s financial security because it can be used to pay funeral costs, lingering debt, and even in some cases supplement income for your dependents, the value of a life insurance policy is not always evident to women without dependents. “The best time would be when they are financially responsible, not just for someone else but also their own selves. Many women think of getting life insurance when they get married or have children. However, many should be looking at getting coverage before as a way of income protection, if something were to happen to them. What I mean by income protection is not just if they pass away, but now they can get policies with accelerated benefits in case of a critical illness or chronic illness,” advises Tomasini. Some life insurance policies have terms that allow the policyholder to receive part of the death benefit in advance under specific circumstances. Being able to pay medical bills and take care of yourself is an important part of being responsible, self-reliant, and independent. As you think about the timing of your life insurance purchase, consider how premium rates change based on health and age. "Life insurance typically increases in cost with age and some life insurance requires the person to pass underwriting to determine overall health to receive the policy. Because age and health are important factors in life insurance, the best time for millennial women to buy life insurance is as soon as possible,” recommends Dubauskas. In addition to locking in a lower premium, buying life insurance sooner rather than later has an additional advantage for permanent policies. “Most whole and universal life policies have a cash value associated with them, so they could be building up a savings that you could use while you’re still alive. These cash accounts usually grow at a fixed interest rate much higher than the interest rate that you would receive at a bank,” says Welka. Are there cases when it’s best not to buy life insurance? Most often it’s better to have life insurance coverage than to not have it. However, there are some circumstances when having your own life insurance policy may not be a pressing need. Tomasini identifies two potential situations: “If your spouse has you added as spouse rider. I always say people should each have their own policy though, as there are many downfalls to those spouse riders. If you have coverage through your job, that's okay, but that's usually not enough coverage, and you can't always take that with you if you change jobs.” While there are some cases where getting your own life insurance policy may not be a big priority, it’s usually best to make sure that you have the coverage you need. “We purchase home owners insurance for our homes, auto insurance for our vehicles, health insurance for ourselves in case we get sick — we even buy insurance for our phones. We all know one thing — we are going to pass away someday. Why wouldn’t you want to purchase insurance on your life? Our lives are much more valuable than a home, car or phone. Insuring your life is important for everyone,” says Welka. However, adding a life insurance monthly premium to your budget may be tricky. "Life insurance is very flexible and if a millennial woman doesn’t have a lot of income for life insurance, a smaller face value term life policy ($10,000 or $25,000) that costs less than $30 per month might be the best solution,” suggests Dubauskas. What should millennial women know about the life insurance underwriting process? Buying life insurance is a little more involved than picking a product and buying it. Before you can buy it, you have to apply and be approved. Part of the approval process includes a review of your medical history and current health called medical underwriting. Underwriting is how the insurance company evaluates the risk of insuring the applicant and what the premium rates will be. "Underwriting can range from very simple to very complex, with simple being for lower amounts of life insurance and complex underwriting being for high amounts of life insurance. The most simple form of underwriting is called ‘guaranteed issue’ and that means that no matter your health condition, you will be issued health insurance. The most complex form of underwriting is called ‘fully underwritten’ and that will include a comprehensive review of medical records, pharmacy records, as well as a medical exam by a doctor,” says Dubauskas. The underwriting you’ll undergo will depend on the kind of policy you choose and requirements the insurer has for underwriting that policy. Some insurance companies also have accelerated underwriting. “With accelerated underwriting processes much of it is done automatically. People can now qualify for policies without a medical exam for large amounts of up to $1,000,000 (term or permanent coverage) and still get the preferred ratings and get approved in days, sometimes even instantly. If it's more than that amount ($1,000,000) then, yes, they would need to do a physical exam which is covered by the company and done at their home or office. With a fully underwritten (medical exam), it usually takes about a week after the exam to get an offer from the company as long as there is nothing else pending,” says Tomasini. Whatever the underwriting process looks like, it’s important to maintain healthy habits. “Sometimes, you may have to take a small physical exam, have a urine test, or bloodwork. Make sure you are taking care of yourself physically by drinking plenty of water, exercising ,and eating healthy. The insurance companies may ask you questions about your health background. Make sure you answer their questions honestly, but don’t give out more information than they need,” advises Welka. Any other advice? Welka adds, “Talk with a professional who can guide you through the process of buying life insurance so you find the best, most affordable policy for your lifestyle.” Dubauskas confims that "Life insurance provides peace of mind, knowing that in the unlikely event something happens, life insurance will be there to help. For millennial women who have never purchased life insurance before, buy a small amount of term life insurance and increase it as you need it later." And Tomasini's final advice: “The longer you wait to get life insurance the more costly it might be. Also, being able to qualify for medical reasons is important. There are a lot of myths about life insurance and many are shocked about all the benefits and truly how affordable it is.” Millennial life insurance Fully evaluating your situation will help you determine the amount of coverage you need and the kind of policy that would work well for you. Buying life insurance sooner rather than later will also help you qualify for lower premium rates. Asking questions, working with a reliable, independent life insurance agent, and understanding the application process will also help you successfully navigate buying life insurance. Want more life insurance advice? Check out these articles: 5 Pieces of the Worst Life Insurance Advice 5 Pieces of the Best Life Insurance Advice
Life insurance has lots of options. Once you decide the kind of policy you want, you can explore what riders, or additional coverage, you want to add to your policy. With some policies living benefits are automatically included; with others you have to add them with riders. Here are answers to five questions about living benefits: What are living benefits of life insurance? What type of life insurance policies have living benefits? What are the pros and cons of living benefits? What should you consider when adding living benefits to a life insurance policy? What should you consider when deciding to use living benefits? What are living benefits of life insurance? Living benefits are funds that can be accessed while living. Living benefits include the cash value of a policy, accelerated death benefit riders, and even premium waivers. Cash value is only available with permanent life insurance policies. Depending on the terms of your policy, you can borrow against the cash value or use it for living expenses during retirement. Accelerated death benefit riders allow policyholders to access part of the death benefit early in the event of a terminal illness, critical illness, or chronic illness. Be sure to understand the terms of the rider and how it works before adding it. Brian Greenberg, True Blue Life Insurance Founder and CEO“Part of the definition of accelerated death benefits, or ADB, is the terminal illness rider. The terminal illness ADB is a feature that is required by law in almost every state in the U.S. and is considered separate from other accelerated benefits. It is interesting why the terminal illness rider is required by law: People with terminal diagnoses were selling their life insurance policies for pennies on the dollar in what is called a viatical settlement. The practice of buying policies from terminal patients became predatory, and most state insurance departments began requiring it by law.” Long-term care benefits can also be added. These benefits help pay the cost of long-term care in a facility. This rider can be more cost-effective than purchasing a separate long-term care insurance policy. A disability premium waiver is a nice benefit to add because it allows you to keep your life insurance coverage without having to pay premiums. Adding riders and other benefits can make premium rates increase. However, the additional coverage may make it worthwhile for some life insurance shoppers. Sam Price, Assurance Financial Solutions Independent Agent"An accelerated death benefit is a living benefit in nearly every life insurance policy now. In most cases, you don't even have to pay extra for that benefit. But only some companies make more living benefits available such as protection for cancer, heart disease, stroke, transplants, and even long-term care benefits to name a few." As these living benefits have become more common, the rates have also lowered. Jeff Root, Rootfin Insurance Blog Owner“Over the last two years, life insurance policies with living benefits rates have come down substantially as more carriers enter the field. If you're comparing rates for term life insurance, it can be only 10–20 percent more expensive (depending on the company) to buy a policy that has living benefits — meaning you can access the death benefit in case of a critical illness like cancer, heart attack or stroke. That's so much more peace of mind for very little additional cost.” What types of life insurance policy has living benefits? While some living benefits, like cash value, are only available with permanent policies. It’s possible to find term life policies with accelerated death benefit riders and disability premium waivers. John Holloway, NoExam.com“All types of policies can have living benefit riders added. In regard to term life insurance, it is usually in the form of riders that can be added on for a small increase in premium. Permanent life insurance offers cash value which provides other living benefits such as tax deferred growth and access to cash later in life.” When looking at accelerated death benefit riders, be sure to understand what the definitions are for qualifying for an accelerated benefit. Laura Donovan, Sonder Financial Founder"Many companies now have riders for Terminal Illness (a diagnosis with typically 1 or 2 years life expectancy) Chronic Illness (you need help completing basic daily activities, or are maybe diagnosed with Alzheimer's or dementia) and some have riders for Critical Illness (life threatening diagnoses like cancer, heart attacks, strokes, ect.) While these are becoming more common across permanent insurance contracts, there are some companies offering these benefits on even their term insurance contracts — which is great for clients. It’s important to look at the fine print for the different triggering events that are accepted, because they do vary from company to company. If you’re purchasing term insurance that offers these illness 'living benefits' — make sure the company’s term contract is convertible." What are the pros and cons of living benefits? Pros Living benefits give you more options on how to best use your life insurance policy because they allow you to use the accrued cash value or accelerate some of the death benefit for qualified expenses. Other living benefits, like disability premium waiver and guaranteed insurability riders, allow you to keep your coverage even when unexpected health challenges arise. Experts on the pros of living benefits Brian Greenber, True Blue Life Insurance Founder and CEO“There are not many cons regarding living benefits. Insurance companies are adding these on to current products at meager, or no cost at all. The pros are that you can access your death benefit while you are alive. Living benefits are like lesser versions of a disability and long term care policy.” John Holloway, NoExam.com“The pros of living benefits is that they can provide relief at a time when you need it most. Riders can be added on to your policy to provide things like an accelerated death benefit, disability waiver of premium, or guaranteed insurability later in life.” Mike Sosso, InsuranceSmart LLC Owner and Licensed Life Insurance Agent“Structuring a policy with living benefits often increases the cost of the policy, but offers insured greater benefits and flexibility and often at a substantially lower price than purchasing two or three separate policies to cover all the same issues. As an example, a policy with a critical illness, chronic illness, or long term care accelerated death benefit rider provides the insured the option to take all or a portion of the death benefit to help with needed expenses incurred in the event of a qualifying chronic illness, critical illness, or long term care need at a fraction of the cost of purchasing each of these polices separately." Cons Monthly premiums increase the more riders you add to a life insurance policy. Be aware of the price difference and determine whether the additional coverage offered in exchange is worth it for your situation. In some situations, it is. In addition to higher premiums, any portion of the death benefit that is accelerated will not be received by your beneficiaries. Be mindful when accelerating your benefit so that your immediate needs can be met and your beneficiaries future needs can also be met. Experts on the cons of living benefits Chane Steiner, Crediful CEO“Depending on where you live, you may be subject to taxation on the benefit received. You may have to pay a fee depending on the insurance company.” Randy VanderVaate, Funeral Funds Owner and CEO“Living benefits are not disability insurance and are not a replacement for disability insurance. The living benefits are deducted from the face value of the insurance policy, reducing the insured’s death benefit. Your insurance company may also limit the amount that may be withdrawn from your policy (example: 50 percent for the critical illness, and 50 percent upon death).” Mike Sosso, InsuranceSmart LLC Owner and Licensed Life Insurance Agent“There is a downside of bundling critical illness, chronic illness, or long term care accelerated death benefit riders into one policy. When you exercise the accelerated death benefit rider, the death benefit always reduces equal to or in some cases greater than the amount of the accelerated benefit taken. This in some instances can even eliminate the death benefit entirely. The accelerated death benefit, however, can typically be taken as a partial against the total face amount to leave you a residual amount to pay out at the insured’s death.” What should you consider when deciding to add living benefits? Consider the following four factors before purchasing life insurance with living benefits: Family health history Current health Occupation risks Existing coverage Future constraints Policy terms Family health history John Holloway, NoExam.com“Something to consider would be family medical history. If both parents have passed away from the same terminal illness, then you might have a higher chance of the same. An accelerated death benefit would be nice to have if you were someday diagnosed with a terminal illness.” Current health Mark Charnet, American Prosperity Group Founder and CEO"The number one item is the proposed insured’s insurability, as the policy’s premium is based on this. In fact, an applicant may be accepted for the life insurance portion and denied an Living Benefits Rider (LBR) for long-term care (LTC), as an example. Bone cracks or other osteoporosis symptoms may deny the applicant the LBR, yet life expectancy would be unaffected by this and the offer from the underwriting team may be a standard rating or better." Occupation risks John Holloway, NoExam.com“If your occupation is somewhat dangerous, then the disability waiver of premium rider would allow you to avoid paying premiums while disabled. This is something to consider if there is any chance that you could become disabled.” Existing coverage Brian Greenberg, True Blue Life Insurance Founder and CEO“Adding living benefits to your insurance policy is worth it if you meet two requirements. One, the price difference is minimal. Two, you do not already have a disability, critical illness, or long term care policy.” Randy VanderVaate, Funeral Funds Owner and CEO“People should consider their existing life insurance benefits and disability insurance benefits before deciding if they need living benefits included in their insurance policy. As long as the rates are competitive between two different carries, it is wise to get a plan that provides living benefits.” Future constraints Jason Fisher, BestLifeRates.org, LLC“One may want to consider if having access to living benefits means they forego other coverage. For example, is a person has access to a living benefit, it may require them to "spend down" the benefit first before being able to submit a claim to certain health insurance plans.” Gordon E. Conwell, III, Americanterm.com"Knowing how each company pays out living benefits prior to purchasing makes sense, so that you’re not unpleasantly surprised later…most companies offer a discounting method of paying out the chronic and critical living benefits. I suspect many people are going to be unhappy later with this discounting method of getting living benefits if/when they make a living benefit claim someday since I suspect no one is going to get the full amount they request on a living benefit claim under this discounted method, but regardless of the amount you get, your policy will still be reduced by the original amount requested." Policy terms Virginia Hamill, FitSmallBusiness.com Senior Insurance Analyst"Some insurers offer these riders at an additional cost; others automatically include them in the policy, although you have to imagine the expense is baked into premium for those. Plus, using your living benefits rider can come with costs. Insurers often charge administrative fees, and some states charge tax on the benefits. There is no federal tax on living benefits." How and when should living benefits be used? Living benefits can only be used according to the terms outlined in the policy. It’s important to understand these terms before accessing any living benefit, especially when accelerating the death benefit. Ben Glancz, Financial Representative“If you plan on tapping into the living benefit option of your policy, you need to know what the ramifications will be on your death benefit, and what expenses you won’t be able to pay for because of this.” Policyholders can choose to accelerate some of the death benefit when the insured person has a terminal, chronic, or critical illness depending on the terms of the rider. Medical treatment and hospice care can be quite expensive in these cases, so being able to access additional funds is valuable. It makes it easier to seek treatment because there is protection from debt. When accessing these funds, it’s important to weigh future expenses with immediate expenses. Matt Schmidt, Diabetes 365“While living benefits on a life insurance policy sounds great initially, many people forget that the amount a person accelerates while living, will offset the original amount of the life insurance. Many people take out a policy, for a specific financial reason. If a person 'dips' into their policy after suffering from a major health issue, and then passes away, it could leave their family without the proper amount of life insurance they need.” Once you’ve received an accelerated death benefit payout, use those funds wisely. Chane Steiner, Crediful CEO“If you have medical bills to pay, pay them (but not without trying to negotiate). The rest, put it in a high yielding savings account (about 2 percent per month). You'll be dipping into it for your medical expenses, but at least you'll be receiving some interest on that money as you wait to need it.” Are living benefits worth it? Understanding what living benefits options are available and thinking critically about potential future needs will help you determine which ones you might want added to your life insurance policy. Weighing the pros and cons will also help you decide if a living benefit is worth adding to your policy. Always be sure that you understand the terms of your life insurance policy and how the living benefit can be used. These riders can be a good way to protect your family’s current in addition to their future financial security.