Life insurance provides essential financial protection for your loved ones if you pass away. With economic uncertainty rising, having adequate life insurance coverage is critical. This definitive guide explains what life insurance is, who needs coverage, costs and savings, types of policies, and how to get insured this year.
What is life insurance exactly?
Life insurance is a contract you purchase to pay out a lump sum of money to your chosen beneficiaries if you die while the policy is active. This money can help your family maintain financial stability after losing your income.
The person buying the life insurance policy is called the policy owner. The person whose life is insured is called the insured. Beneficiaries receive payouts from the policy after the insured dies. Beneficiaries are often spouses, children, other family members or friends.
Some key things life insurance proceeds can be used for include:
- Paying outstanding debts (mortgage, loans, medical bills)
- Covering funeral and burial costs
- Replacing lost income for daily living expenses
- Saving for child’s future education
- Donating to charity
Life insurance gives invaluable peace of mind knowing your family has funds to cover final expenses, debts, and financial needs during their grieving process.
Who Needs Life Insurance?
Many people benefit from having some amount of life insurance tailored to their situation. When determining if you need coverage, ask yourself these key questions:
✅ Do you have major debts that would burden loved ones like a mortgage or student loans?
✅ Does your family depend on your income for daily living expenses?
✅ Would your family struggle to cover your final expenses after you’re gone?
If you answered yes to any question, then some amount of life insurance is likely a wise investment to consider.
Here are some common categories of people who need coverage:
Families with kids – Replace income to support stay-at-home parents, fund college savings
New mortgages – Pay off large remaining loan balances
Nearing retirement – Supplement pension income spouse would lose
Small business owners – Protect businesses from losing an owner or key employee
Of course, personal situations differ greatly. Connecting with a policy expert to review needs is recommended.
Shocking Out-Of-Pocket Death Costs
To demonstrate why life insurance matters, let’s break down real dollar amounts a family could owe if passing without coverage…
Funeral costs today average over $9,000. This includes everything from caskets and urns to ceremonies and burial plots. Many cannot readily afford this sudden expense.
Uninsured mortgage balances commonly exceed $200,000. This debt passes along to surviving co-signers. Could you continue payments alone if your partner died?
College savings evaporate without the deceased parent’s intended support. Average 4-year university exceeds $100,000 these days. Can the living provider handle solo?
Families see incomes slashed losing a working parent or spouse. The average American household today relies on dual incomes.
While no amount of money can ever replace a lost loved one, life insurance proceeds help cover these tangible expenses and debts left behind during an unfathomably difficult time.
A relevant statistic visual or chart emphasizing the average American’s lack of monetary buffers could be effective here.
Types of Life Insurance Policies
Life insurance policies generally fit into two categories – term life insurance and permanent life insurance.
Term life insurance provides pure death benefit protection for a set period or “term”. It does not accrue cash value.
- Lower cost way to obtain coverage
- Ideal for meeting temporary needs
- Policy terms range from 1 year to 30 years
Permanent life insurance covers you for your entire life, regardless of health changes, providing lifelong protection. It invests premiums you pay, allowing policies to accrue cash value.
- Includes whole life, universal life, variable life
- Cost more but remain in force indefinitely
- The cash value part of the policy can grow or be borrowed against
When getting quotes, decide if you need lifelong coverage or coverage for a set term to meet a specific multi-year need like a 15-30-year mortgage balance. This guides whether to price term or permanent plans.
Calculating Coverage Amounts and Costs
The ideal life insurance policy amount depends on your financial obligations, debts that need to be covered if you pass, income being replaced to support dependents and personal savings targets like college funds or retirement gaps.
Consider bigger-picture factors like being a higher wage earner in your household or having sizable debts before running quotes. Teaming up with an independent insurance broker who can objectively assess needs across insurers, not just push proprietary products, is invaluable for customizing policy solutions.
In terms of pricing, life insurance costs vary based on:
- Age and health at the time of purchase
- Length of the policy term
- Overall benefit amount selected
- Type of permanent life product
The younger and healthier you are when buying coverage, the lower your premium costs will be as the risk of near-term death decreases. Of course, unforeseen health circumstances can alter costs which is why locking in coverage early pays off long run.
As an example, a healthy 30-year-old may pay $20 monthly for $250,000 of term life insurance. By age 50, the same amount could cost upwards of $100. Take advantage while young!
Where To Get Covered in 2023
Now that you know more about life insurance – who needs it, costs, and policy types – here is a quick guide to where to secure coverage this year:
Workplace Plans Many employers offer group life insurance up to basic amounts like 1-2x your salary. This can be a cost-effective starting point. However, it normally ends if you change jobs.
Individual Policies Shopping the open life insurance market across carriers lets you customize higher benefit amounts, terms, and types. Get quotes through independent agents licensed across multiple highly rated insurance firms.
Previously Issued Policies
Check if you have existing coverage through past jobs or individually. Review beneficiaries and terms to see if adjustments are needed or if additional policies would be beneficial.
When exploring options, involving a licensed advisor to represent your best interests across insurers is key. Avoid captive agents selling just one carrier’s offerings without transparency.
Key Life Insurance Takeaways
After going through this thorough rundown, keep these core concepts in mind:
- Life insurance creates an essential financial safety net for loved ones to continue if you pass prematurely
- Shop for the right term length and amount meeting family debts and income gaps
- Lock in coverage while young and healthy when premiums lowest
- Work with independent broker acting as your advocate across insurers
- Revisit policies over time as obligations and laws evolve
Hope this gives you confidence deciding how life insurance fits your 2023 financial plans! Please reach out with any other questions. Happy to help ensure your family’s future financial security.