How to choose life insurance

The pandemic is spurring more Americans to buy coverage. Here’s how to do it affordably.

For many people, the idea of buying life insurance brings to mind the annoying insurance agent Ned Ryerson in the 1993 comedy “Groundhog Day.”

“Do you have life insurance?” Ryerson asks the Bill Murray character, Phil Connors. “Because if you do, you could always use a little more. Am I right or am I right?”

More Americans are realizing that Ned may be right, especially considering the COVID-19 pandemic.

The number of life insurance policies sold jumped jumped 11 percent in the first quarter of 2021, compared with last year, according to LIMRA, a financial services trade association. And nearly one-third of consumers say COVID-19 concerns have made it more likely that they will purchase life insurance coverage in the next 12 months, according to a recent survey by LIMRA and Life Happens, a nonprofit group.

That’s because life insurance can provide a crucial financial safety net if you have loved ones to support. Millennials are especially concerned about leaving their families in a difficult situation if they die, according to the survey, with 43 percent saying they were likely to purchase coverage.

Even so, many Americans who would benefit from coverage still don’t have it. Recent industry data (PDF) show just 52 percent of adult Americans report having life insurance, down from 63 percent in 2011.

There are varied reasons for the coverage gap. Life insurance is still not a priority for many families, who are focused on paying immediate bills, such as rent or groceries, as well as struggling to recover from the pandemic.

Many people put off buying a policy because they believe they have sufficient coverage through their employer, says Tom Fredrickson, a fee-only financial planner in Brooklyn.

“The problem is that your employer life insurance benefit is usually limited, perhaps one or two times salary, and you often lose it when you change jobs,” Fredrickson says.

So if you have family members who depend on you, take the time now to review your life insurance needs.

Given the complexity of these decisions, it’s a good idea to consult with a fee-only financial planner—one who has no direct interest in selling insurance—to help calculate your coverage needs and how to choose a policy.

You can find tips for choosing a choosing a financial adviser or a working with a fiduciary. And to help you get started, here are answers to three frequently asked questions about life insurance.

How Much Coverage Do You Need?

When it comes to figuring out the right amount of life insurance to buy, it’s tempting to rely on rules of thumb, such as purchasing a multiple of your annual income—say, 10 to 15 times your salary—as a death benefit. That would at least ensure that your family has resources that should last for a while.

But chances are, online tools or a rule-of-thumb approach won’t provide the best answer for your financial situation, says Steve Parrish, Co-Director of the Center for Retirement Income at the American College of Financial Services.

“It’s important to use your own numbers and look at the specific obligations and needs your family will have,” Parrish says.

If you have young children, for example, and your stay-at-home spouse needs to return to work, you may want to fund additional child-care costs, as well as college educations. You may have mortgage and credit card debt to pay off, additional medical costs, or elderly parents who need financial support.

It makes sense to subtract any emergency savings or current insurance coverage (if you intend to keep it) from your financial needs. But you will also want to increase the coverage amount to account for future inflation and salary increases.

What’s the Cheapest Way to Buy a Policy?

The simplest and cheapest option is term life insurance. You pay a yearly premium in return for a fixed death benefit that goes to your beneficiary if you die while the policy is in force.

With a term policy, you get the most benefit per premium dollar, says Steven Weisbart, former chief economist of the Insurance Information Institute, an industry group that provides consumer information.

That frees up more of your cash flow for other expenses, such as for your kids’ college educations or for retirement savings.

For example, a 35-year-old nonsmoking man in good health might pay as little as $21 per month, or $252 per year, in premiums for a $500,000, 20-year level term policy, according to Quotacy, an online life insurance brokerage company. Upping that amount to $1 million would run $34 per month, or $408 per year.

By contrast, a 35-year-old healthy, nonsmoking woman might pay somewhat less—$216 per year for a $500,000 policy, or $360 for $1 million in coverage.

If you have a life insurance benefit at work, you can consider increasing that coverage, if it’s an option. But be sure to shop around first, Fredrickson says, because it may be more affordable to buy it separately.

The sooner you make the purchase, the better, because the cost of premiums rises as you age and your risk of having health problems increases, says Jeremy Hallett, CEO of Quotacy.

A 45-year-old healthy, nonsmoking man might pay $1,056 per year for a $1 million policy, and a 55-year-old may be charged $2,664, Quotacy’s data show.

Term life insurance does have a downside: It’s limited. A policy is typically purchased for a 10-, 20-, or 30-year term—after that, the coverage ends and you don’t get any of your money back.

When your term policy expires, you often have an option to convert it to permanent, or cash-value, insurance, which combines a death benefit with an investment account, as we explain below.

By converting, you avoid having to get a medical exam, as with a new policy. But this option will be more costly than your current term coverage.

Should You Consider Cash-Value Insurance?

With a permanent life insurance policy, you generally get a death benefit as well as a savings or investment component. There are different types of cash-value coverage, including whole life and universal life, which offer varying investing options, carry higher costs, and are often complicated.

With whole life, for instance, only a portion of your premium goes to the death benefit, so you will generally have to pay a higher premium to get the equivalent benefit you would with a term policy. For example, that healthy 35-year-old man purchasing $500,000 in coverage might pay $4,488 per year for a whole life policy, vs. $252 for term, Quotacy says.

Granted, a portion of your premiums would go toward the savings or investing account. But to come out ahead you will need to hold a cash-value policy for many years, says Glenn Daily, a fee-only life insurance adviser in New York City. If you surrender your policy in the first few years, before the value has built up, you may get little or no money back.

Permanent insurance may be worth considering for some people, such as those who want to provide for grandchildren or special-needs family members. But before you consider one of these policies, first make sure you have maxed out all your tax-deferred savings. “Fully funding your 401(k) and Roth IRA will give you growth with the most flexibility,” Daily says.

INSURANCE COMPANIES AND THE TYPES OF SERVICES THEY OFFER

How to choose life insurance

An insurance company primarily offers insurance services to clients. These services include; protection against car accidents, burglary, house fire, life insurance, health insurance and so on. An individual who purchases an insurance is known as an insured or a policyholder, while the company that offers an insurance is known as an insurance company, or insurer, or underwriter.

What is insurance?

Insurance, as defined by Wikipedia, is a means of protection from any kind of loss, be it the loss of life, or of property. Insurance has been proven to be a form of risk management, which is primarily used to hedge against the risk of an uncertain or contingent loss. The business dictionary defines it as a Risk-transfer mechanism, which ensures full or partial financial compensation for the damage(s) or loss caused by event(s) which are beyond the control of the insured party. Types of insurance offered include Life insurance Auto insurance, Health insurance, Travel insurance, Dental insurance, etc.

What is an insurance company?

How to choose life insurance

Insurance companies are generally companies who provide insurance services for clients. It may be government owned, profit or non-profit which are liable for meeting the financial needs of their clients when they experience bad event(s) beyond their control. For insurance companies to intervene in meeting the demand of their client, their client must have applied for an insurance scheme and should have contributed to that course.

Functions of an insurance company/insurance

The main function of an insurance company is to provide insurance to cater for unforeseen circumstances which occur beyond the control of a client. Amidst this primary function, there are sub-functions of an insurance company, and they include;

  • They help to cater for required insurance: There is some required insurance by the government, to which all individuals must apply for their employees. These insurance policies include; payment for worker’s compensation, unemployment insurance, disability insurance for employees etc. These are to ensure that employees are safe if they experience job loss or other unforeseen events, and insurance companies come to play here.
  • They help to cater for liability insurance: Liability Insurance is an insurance policy which covers payment for legal fees and judgment, which are associated with professional errors and negligence. They include; Liability insurance for trucking companies in case of accidents, manufacturing industries in case of product defect, for physicians, and to pay for personal damages in the case of a lawsuit.
  • They help cater for property insurance: property insurance includes insurance against damages to property caused by fire, storm and another hazard, and examples of items covered by this insurance policy include; machinery, business buildings, inventory, and even trademarks and copyrights.

Aside these functions of insurance companies, insurance on its own help to provide certainty of payment in case of any loss, provides protection against any loss, act as a risk-sharing medium, provides capital as well as improves efficiency and helps economic progress of any society.

Types of insurance companies?

How to choose life insurance

There are various types of insurance companies, but for this article, we will be considering the Allianz worldwide care, the electric insurance, liberty mutual insurance company, rate kick insurance company and esurance insurance company. These companies offer services ranging from health insurance, to life insurance policy, which are masterminded by life insurance companies, travel insurance, auto insurance, liberty and Allianz.

Allianz worldwide cares insurance company: Allianz care is the leading provider of health and wellbeing insurance internationally. Its company offers insurance services which cover life, health and disability insurance. They provide a range of international healthcare plans for mobile individuals globally. Their product and services include:

  • Individual Health Care Plan
  • Employer Healthcare Plans
  • Life and Disability Cover
  • Global Health and Protection Services
  • Administration Services Only.

How to choose life insurance

Top 4 insurance companies

Electric insurance

How to choose life insurance

Electric insurance company offers insurance services for your home, automobile, and umbrella coverages. The home coverage includes coverage for your home, rental insurance and condo. The home insurance covers more than just the structure, as it goes a long way to cater for your garage, pool, fence, belongings in it, etc. It also covers for liability, to protect an individual from a lawsuit, as well as to pay additional temporal living expenses, if the client cannot live in his/her house due to an unforeseen damage. Coverage for condo also can be gotten from electric insurance, as it offers you coverage for your furniture, appliances, personal possessions and cabinet. It also covers for liability if someone is hurt in your unit. Finally, electric insurance provides coverage for a client’s apartment to protect the client’s belongings from fire, vandalism, theft and another unforeseen event(s), even while living in a rented apartment.

Liberty mutual

Liberty mutual insurance company is an insurance company which offers coverage for individuals, families, and businesses. Their services include; Car insurance, Homeowner insurance, Renters insurance, Fraud protection, life insurance, pet insurance, accident insurance, mobile phone insurance and so on.

Rate kick

Like other insurance companies earlier listed, Rate-kick offers a variety of coverage plans for risk-management by clients.

Esurance insurance

Esurance insurance company offers a range of insurance plans to protect clients from an unforeseen event(s).

Conclusion

How to choose life insurance

In conclusion, insurance companies offer a variety of coverage plans to cater for risk/loss of life and property. Various insurance companies exist all over the globe, and a few have been listening here, together with their offers. Insurance has been proven to be effective, and have been recommended for every individual, due to the vast benefits which the individual seeks to gain from the scheme. This article has created an awareness on insurance companies, as well as highlighted some insurance companies and the services they offer.

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How to choose life insurance

After choosing the benefit the policy will pay out, the most important decision when buying term life insurance is how many years of coverage to get. The length you choose affects not only how long you’ll be protected but the premium you’ll pay.

Term policies are the most popular life insurance option, in large part because their cost is far lower than for permanent insurance policies of the whole life and universal life types. Term lengths typically range from 10 years to 30 years, and choosing the term that’s best for you requires balancing the cost of coverage with the risk of having the policy run out when you still need protection.

The longer a policy will run, the more you it will cost you per month or year. That’s because life insurers price policies according to the likelihood they’ll have to pay the death benefit over the years the coverage is in effect, explains David Pierce, a professor of Insurance at The American College of Financial Services. “The older policyholders get, the fewer years they are likely to live, statistically speaking — therefore the increase in premium.”

The cost differences by term can be substantial, according to Ozzie Gonzalez, director of employee benefits for the JAG Insurance Group. For example, he estimates that a healthy 35-year-old male seeking $500,000 in coverage might pay around $3,000 more in premiums in the first ten years of a 30-year policy compared with opting for a policy that runs for only 10 years.

The downside of a shorter policy, of course, is that it ends earlier — and if you still require coverage when time is up, it will be more expensive than it was for your original policy, due to your age. Worse, if you develop medical issues during that time you could be shut out of coverage entirely, depending on how serious the health condition is, says Pierce.

Here’s more on the factors that should drive your decision on term length, along with how the specific term lengths may meet your needs.

  • 我可以选择哪些保费支付方式?
  • 怎么付保费最流行?
  • 投保后保费就不能改了吗?

我可以选择哪些保费支付方式?各自有什么优点和缺点

How to choose life insurance

寻求资产的积累可能是一些投保人的目标。

How to choose life insurance

对于保费支付模式非常灵活的万能型终身人寿保险——比如Guaranteed insurance,投资型保险,或Index insurance——投保人甚至可以在第1年就支付 所能允许最多 的保费金额,来追求最快速的现金值积累能力,来完成保单资产的积累。

寻求终身的保障可能是另外一些投保人的目标。

而给孩子或者孙子女买人寿保险是一个“永恒”的主题。

一些家长和爷爷奶奶, 通常会选择10年到20年付清的方案 ,来为子女或孙子孙女购买终身型人寿保险。

最流行常见的保费支付周期是多久?

according to万通互惠理财(MassMutual)The data, 10年付清的保费支付方式,是目前看起来对人们最有吸引力的。

How to choose life insurance

选择了10年支付保费,就不能改了吗?

无论我们在投保时选择了什么样的保费缴存方案,之后我们可以随时调整RPU(Paid-Up w/ Reduced Coverage )——对保单年度分红的指定管理——来被动减少保费或减少支付周期。

How to choose life insurance

How to choose life insurance

投保人可以根据自己的家庭财务状况和主观意愿,选择按照原有方案进行缴存,或者按照新的提案来缴存保费,从而拥有了更多的 主动性和灵活性 .

Article summary

“一般的经验来说,如果你只是纯粹的买保障,比如买终身重大疾病保护,或者买一份保险理赔金留给子女,那么付保费的时间可以拖越长越好, 20年付,付到65岁,甚至,付到100岁,都可以。” Heather 说, “如果你希望更高的保单账户内部回报率,那么越快付清,越早OverFund——比如10年付清的储蓄分红保险,或者5年,甚至利用个别保险公司提供的一笔提前付满的指数保险,则能更快达到我们的目标。”

American Life Insurance Guide一直强调 LBYB(Learn Before You Buy )原则,寿险指南社区网站里也提供了Insurance College.Insurance Product Center.保险产品评测.Insurance strategy guide等大量专题供投保人参考。当我们掌握一定基础知识后,请务必寻求专业的人寿保单规划人员,或只收取专业服务费的保险经纪顾问的协助,找到真正能更好实现我们需求的产品和方案。 ( 全文完)

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How to choose life insurance

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How to choose life insurance

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We explain what life insurance is all about, and throw in a few handy hints for good measure.

When you take out a life insurance policy, you’re relying on the cover to offer solid financial protection to your family when you die.

It makes sense to do your homework before you sign up, so you can be sure you’re getting the most appropriate cover and best-value deal.

What is life insurance for?

Before you sign up for a policy, you need to work out exactly why you want to be covered:

Bought a new home – a life insurance payout could allow your partner or family to pay off the mortgage after your death.

Having children – a life insurance payout could provide for them while they’re growing up if they could no longer rely on your income.

Leave a legacy – a policy could provide your surviving relatives with an inheritance when you die.

Funeral costs – a policy that could provide your family with a lump sum to assist with funeral costs.

How much cover should you take out?

In general, the more protection your life insurance policy offers, the higher your premiums.

If you’re looking to cover your mortgage, working out how much cover you need should be straightforward. Use our life insurance calculator to figure this out.

If you want to provide your family with a regular income after your death, you should look at your current outgoings and think about possible future costs to work out an accurate figure.

If you’re over 50 and your main concern is leaving an inheritance, or helping your family cover funeral costs, the cover may depend more on what you can afford to pay in premiums.

How long should the policy last?

When you buy life cover, it can last either for a fixed period or for the rest of your life.

A policy that lasts for a fixed time period is known as term.

If you only want cover for your mortgage — which will typically last 25 years — or to give your family a financial safety net, then term insurance is usually more appropriate.

If you’re planning on going strong and outliving everyone, great for you.

However, the downside to term insurance is that, if you live longer than the policy term there’s no payout, so it might be worth looking at a different type of policy.

If, on the other hand, you want the policy to provide an inheritance, whole-of-life insurance could be a better bet.

Should the level of insurance change over time?

If you’re covering your mortgage, the amount you owe will fall as you make monthly repayments.

So it makes sense that the scale of your life cover reduces in line with the loan.

This is known as decreasing term insurance. Premiums tend to be lower than level term insurance, which stay fixed throughout the term of the policy.

Should you get cover for your partner too?

Traditionally, the main earner in a family would take out life cover. However, if the partner earn less or they’re a stay-at-home parent, there could still be a financial impact if they died.

Also, if you have children you may need to think about costs for child care or domestic work.

If both partners want cover, you can either buy joint life insurance or two separate policies. Joint cover only pays out on the first death, after which the policy ends.

Separate policies would usually pay out when either partner died, offering a higher level of protection.

This option may be more expensive, but it’s worth comparing prices to see whether it’s worth both of you getting covered – read more about the differences between the two.

What other factors affect the cost of life insurance?

As well as the scope of cover and how long it lasts, there are a number of issues that can impact the size of your premiums, including:

Your family medical history

Hazardous jobs and hobbies might also affect the size of your premiums. If you’re a pilot or enjoy mountain climbing, then you might see your prices go up.

Saving tax and hassle

One more thing to consider is writing your life insurance policy in trust.

This means your family may be able to get hold of any payout with the least hassle and the lowest possible tax charge when you die.

Writing your life insurance policy in trust means the cover is ring-fenced outside of the rest of your assets, such as savings, investments and property.

Payments from the policy are not usually included in your estate for inheritance tax purposes. You can find more information in our guide to writing your life insurance policy in trust.

Who term is best for:

  • You need a policy to replace your income over a specified period of time (like raising children or paying off a mortgage)
  • You need a policy to cover short-term financial responsibilities such as a loan or credit card debt
  • You need additional insurance coverage temporarily, such as during child-raising years or starting a business
  • You want the most affordable coverage

Who whole life is best for:

  • You want a policy to last your lifetime, which can be used for legacy planning or to help cover your final expenses
  • You want a policy that builds cash value over time
  • You’re at or nearing retirement age

Universal life insurance: Universal life insurance is a type of permanent insurance. A unique feature of universal life insurance is that the policy owner can choose to adjust the premiums paid, as long as the minimums to maintain the insurance are made. If the owner chooses to pay more than the minimum premiums, the cash value and death benefit can increase.

Indexed universal life insurance: An indexed universal life insurance policy offers the policy owner an option to participate in indexed accounts, where the profit and losses of the account are tied to a specific index, like the S&P 500.

Variable life insurance: A variable policy can have market exposure through the insurance company’s separate account. The separate account is typically managed by experts within the insurance company, where the funds allocated to the separate account options are managed at an aggregate level. Depending on the risk tolerance of the policy owner, a policy can realize gains and losses in investment options with portfolios composed of fixed accounts, money market funds, bonds, mutual funds, and/or stock options.

You want to choose a financially strong company that offers the products you need at rates you can afford.

How to choose life insurance

Hundreds of life insurance companies do business in the United States, from big household names to small regional players. And most of them offer similar types of life insurance , such as term, whole, universal and variable life insurance.

So how do you choose between them? Here are five questions to ask about a company before you buy.

How financially solid is the company?

It’s important to choose a financially strong life insurer. You want the company to be around to pay the death benefit to your beneficiary, whether you pass away in five years or 30.

Look up financial strength ratings to find out how stable the company is. Independent rating firms, such as A.M. Best , Fitch Ratings , Moody’s Investor Services or Standard & Poor’s Ratings Services , issue grades for insurance companies. Keep in mind that each firm has its own rating system. An A+ is the second-best rating from A.M. Best, and the fifth-best rating from Fitch. You can see the ratings for free on the firms’ websites, but you might have to register first.

Don’t judge a company’s stability by its size. Most of the top life insurance companies have been around for a long time — some for more than 150 years — but many small- to medium-sized companies have been in business for just as long and have solid histories of meeting financial obligations, according to industry group Life Happens.

What is the company’s track record?

Check with your state insurance department to get a glimpse of how well a life insurance company serves its customers and lives up to its promises. Charged with regulating the insurance industry, insurance departments keep track of and investigate complaints they receive against insurers. Those may include disputes over claims, policy cancellations, premiums, sales misrepresentations or other issues. Most departments post reports on their websites, showing the number of complaints for each insurer, relative to their number of customers.

You can also look up complaint, licensing and financial information by company on the National Association of Insurance Commissioners website.

What products are available?

Review the company’s life insurance products to make sure it offers a good selection of the type you want to buy, whether that’s term or permanent life insurance, such as whole or universal life.

Some insurers offer innovative products that might appeal to you. For example, John Hancock has term and universal life policies that include a discount if you exercise and wear a Fitbit tracker to prove it.

Is the insurer a mutual company?

Unlike publicly traded insurance companies, which are owned by stockholders, mutual life insurance companies are owned by their policyholders. As a result, if you buy a permanent life insurance policy through a mutual company, you can receive dividends — a share of the company’s surplus revenue.

Each year the mutual company’s board of directors decides how much to distribute to policyholders in the form of dividends. You can take yours in cash, use them to repay policy loans or apply them toward premiums.

Keep in mind that term life policies aren’t eligible for dividends, and dividends are not guaranteed even for holders of permanent policies. Whether a company pays dividends shouldn’t be a make-or-break factor in your decision, but it’s something to understand as you compare insurers.

How do the rates compare?

“Underwriting guidelines” vary widely by company. Insurers use these to determine whether to sell you a policy and how much to charge. If you get turned down or are quoted unaffordable rates by one company, you might have better luck with another. Compare life insurance quotes among several competitors to see how they stack up.

Finally, as you research life insurance companies, be aware that different companies can have similar names, so it’s easy to confuse them. Make sure you know the full name and home office location of any company you consider, the Insurance Information Institute advises.

How to choose life insurance

Common Questions

Why do I need life insurance?

  • Life insurance can offer you some reassurance that the people you love will be taken care of if a tragedy strikes. Payouts are tax-free, so that’s one less thing they will need to worry about.

What is the difference between the types of life insurance?

  • Term life insurance covers you for a length of time, and is generally the most affordable type of life insurance. If something happens to you within the term (10, 15, 20, or 30 years), your beneficiaries will receive the payout benefit. There are other types of insurance for people seeking life-long coverage, but they tend to be more expensive than term life policies.
  • Permanent life insurance is a policy that covers you for your entire life, and usually builds “cash value” over time. There are three types of permanent life insurance policies:
    • Whole life insurance builds value based on a set schedule. You’ll know the exact cash value of your policy at each anniversary. (If you take a loan or make a withdrawal from your policy , the cash value and death benefit will decrease.)
    • Universal life insurance earns a fixed interest rate on the cash value of the policy. While the interest rate may change over time, it will never dip below a guaranteed minimum rate.
    • Variable universal life insurance lets you invest your cash value in the stock market, so your policy value goes up or down based on the performance of your investments. The investment subaccount options in VUL policies are not offered for sale to the general public.

How do I decide on a coverage amount?

  • Think about the amount of coverage you need and the lifestyle you want for your loved ones add up the balance of your mortgage, your credit card debt, and the amount you want to leave your beneficiary (for things like paying for college or paying off loans), then subtract your current savings.

Is the life insurance policy I get through work enough?

  • Keep in mind that employer policies generally don’t move with you if you change jobs, and go up in price as you age. Many people are surprised to learn that the life insurance included as part of their benefits package is only one or two times their salary. For most people, this amount does not cover their needs.

Determining the right insurance coverage for your needs is an important decision. For help with understanding the types of life insurance policies and choosing life insurance, call us at 1-855-590-9780 or get a personalized term life insurance quote online.

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