Isn't the purpose of life insurance to cover funeral and burial expenses?
Yes! That's correct. Many Americans are aware of this. It is the No. 1 reason people have life insurance, according to the Life Happens and LIMRA 2021 Insurance Barometer Study.
In a special report titled "Black Americans: Life Insurance Attitudes and Ownership," the survey delves deeper into the Black community's perceptions and attitudes this year. According to the study, Black Americans understand more about what life insurance does when someone dies. Life insurance is carried by roughly half of all Americans (48%) to cover final expenses, with Black Americans having a higher rate of 66%.
That, however, is only part of the story.
What happens to a family's home, bills, children's education, and planned retirement if a key source of income is lost due to a loved one's death?
How will those expenses and goals be met tomorrow, the next day, next year, and so on?
That is also why there is life insurance. Many people, however, are unaware of the full extent of what a robust life insurance plan can do in the long run. In fact, only one-third of Americans (35%) say a key reason for having life insurance is to replace lost wages or income, with Black Americans slightly lower (31%).
The following expenses can be covered by life insurance:
OUTLAYS IMMEDIATE funeral and burial costs
medical expenses
mortgage estate settlement fees or auto loans for rent Taxes on credit card debt
CURRENT BILLS AND EXPENSES
groceries
Housing, utilities, transportation, insurance, and health care are all included.
running a family business
GOALS FOR THE FUTURE
College costs
Insurance for life Retirement Living Advantages
In addition to income replacement, your policy may include living benefits. Permanent (as opposed to term) life insurance accumulates monetary value over time. And you can use that money however you want - to help you buy a home, pay for an emergency, or even supplement your retirement income. (However, keep in mind that withdrawing or borrowing funds from your policy will reduce its cash value and death benefit, and will result in tax consequences if not repaid.) Furthermore, life insurance can help you leave a financial legacy for your place of worship, alma mater, or any other organization that is important to you.
Keep in mind that life insurance is much more than "burial insurance." It can certainly be a gift that keeps on giving long after you are gone. For more information, visit the life insurance 101 section of our website or contact an insurance specialist to help you find coverage that fits your budget.
What to Look for When Buying Life Insurance
Let's be honest: most people aren't excited about the prospect of purchasing life insurance. The pandemic, on the other hand, has given many people pause. A recent survey found that 45% of younger Americans (ages 22-40) are more likely to purchase life insurance today than they were before COVID.
Knowing what to expect will help you get started if you find yourself in the "likely" category these days. So we turned to Paul Dougherty, a senior life insurance agent in Maryland and former president of the National Association of Insurance and Financial Advisors. Marilyn Gill, a 48-year-old San Francisco life insurance buyer, also spoke with us about her recent experience purchasing a policy through an internet broker.
Recognize an agent's role
"We're at our best when we're solving a problem for a customer who may not even be aware of it," Dougherty adds. "As agents, our job is to get to know you and predict what's coming up for you."
A certified insurance specialist will perform an in-depth financial needs analysis and walk you through the questions that will help you determine how much and what type of insurance is best for you. This consultation is completely free of charge.
"We're not transactional professionals," explains Dougherty. "You have a million things to do on your to-do list." We have the advantage of seeing things through the lens of potential pitfalls and assisting you in mitigating those risks before they become catastrophic. It's a wonderful feeling when we can shed light on some of the questions you may not have even considered asking yourself, and then turn that light to some solutions."
Online coverage is always preferable to no coverage at all.
"The best kind of policy," Dougherty says, "is one that is there when you need it."
If a new customer has an online policy, "we let them know they made a good choice." We frequently leave something alone and devise a strategy to supplement what is already present. I tell people that I'll either give them a better package or make them feel better about what they have. In some cases, they may have exactly what they need."
"I'd love to have someone handle all of my insurance needs," Gill says, "but I didn't have an existing agent, and calling one and going over all of my medical history would have felt far too awkward." I also enjoy conducting research online." She spent her evenings and weekends gathering information for a commercial gardener as a sales and design consultant before submitting an application.
Seek the assistance of a licensed agent.
"Our language is unique to our business," Dougherty adds, "and customers rarely understand it."
"We explain how various policies work and show our customers how we can get a solution using a variety of techniques."
Even if you order online, you can expect to be assisted by a licensed agent. "If I couldn't talk to people on the phone, I wouldn't have gone ahead with an online policy," Gill says. It's far too important to make this decision entirely online."
Five tips for choosing an agent:
Obtain recommendations
Discover their areas of expertise.
Inquire about their membership in any professional organizations.
Set up introductory meetings.
Inquire about their educational and training background. Additional information »
Prepare to throw out preconceived notions.
"I learned a lot," admits Gill. "I learned that if you have a health condition that is successfully managed, your rates may not be affected." That was very informative. That was causing me a great deal of stress."
She was also relieved to learn that her previous smoking habit would have no bearing on her rates. "What matters is that you're in reasonably good health right now."
The cost is the biggest eye-opener for many people. According to the 2021 Insurance Barometer Study, consumers vastly overestimate the cost of life insurance. In fact, a healthy 30-year-old can purchase a $250,000 20-year level term policy for about $13 per month. Gill, for example, paid less than $50 per month for a policy that would pay off her mortgage with plenty of room to spare, leaving her college-age daughter as "my largest asset free and clear."
Recognize the key issues
"Ask yourself, if something were to happen to you tomorrow, what would the financial impact be on the people you care about?" Dougherty suggests.
Through a confidential discussion of your income, other assets, and debts, an agent will assist you in quantifying this impact (like a mortgage). They'll ask you who you want to benefit from the policy — what's known as a beneficiary. They will also inquire about your health, interests, and any other activities that may have an impact on your eligibility. Keep this material, as well as any early ideas and questions, on hand.
The following are some questions to ask your agent:
What kind of life insurance do I need?
What exactly is included?
What if I can't afford to pay my premiums?
Will my insurance rates ever go up?
Can I change or convert my policy in the future?
What companies do you recommend, and why?
When making a decision, longevity and financial stability are important factors to consider.
When comparing several organizations with comparable rates, prioritize reputation, financial stability, and longevity over cost.
"You have to believe that the company has existed and will continue to exist—that they're financially strong enough to make a promise and keep it 40-50 years from now," Dougherty says. The A.M. Best Company rates insurance companies based on their ability to meet financial obligations, whereas the Better Business Bureau and J.D. Powers rate customer satisfaction.