Around a month ago I received an email from a reader who wanted to share his expertise in the life insurance industry. He’s heavily involved in the life insurance industry, which can a big hang up for many people either because they don’t want to think about it, or because they aren’t sure about the finances regarding it.
Hopefully you find this post helpful. This is not a sponsored post just so you all know 🙂 Hope you all have an awesome weekend, Happy Friday!
Life insurance can be an intimidating subject to tackle for people who may are not familiar with how this particular, often sensitive, kind of insurance works. The basics are easy to understand; when a policy holder dies the beneficiaries are paid based on the particulars of the policy.
But there is a lot more that goes into policies and claims that can be confusing to many people. These are some of the most common concerns that people who are new to life insurance have.
I recommend checking out Policy Genius if you are looking for life insurance.
When Should You Get Life Insurance?
Everyone has a unique situation, so there is no hard and fast rule when it comes to the right age to start looking for life insurance. Generally speaking, people usually start putting serious thought into the matter when they realize that their loved ones financial standing will be severely impacted by their own death.
Spouses, children, and elderly parents are the usual beneficiaries of life insurance policies, and this gives a good idea of who is investing. Of course, it never hurts to plan ahead and get a policy when you’re younger – and most likely healthier. This can lock you into a better policy for the rest of your life, even if your health degrades later on.
What Does the Medical Exam Look For?
Many people are put off by life insurance medical exams because they either do not know what it covers, or they are afraid they will fail the exam outright. The medical exam isn’t much different from a normal physical. The life insurance companies are looking for any outlying factors that may make you more of a risk, so they look at your body mass index (BMI), blood pressure, and take urine and blood samples. When paired up with your questionnaire, family history, and demographic, the life insurance companies will have a pretty good idea of your current health status and any potential problems you might have down the line.
A history of tobacco use can be a big red flag for insurers, and when paired with a high BMI and poor family history it is much more likely to get paired with a low health class. It’s important to note that if your medical exam does cause you to get rejected by one company, which it doesn’t apply to all providers and you’re free to shop around.
Who Can Be a Beneficiary?
If you’re taking the policy out on yourself, you have the freedom to choose anyone to be a beneficiary, – even a group of people. Usually this is a spouse or children, but you could even cut your business partner, best friend, grandchildren, mother-in-law, or favorite charity into the benefits if you wanted to.
If you want to share with multiple people, it’s important to determine exactly how much each person gets rather than saying something like “to be divided amongst my children.” This can lead to tension amongst the beneficiaries if they feel slighted or misrepresented and the last thing you want is your loved ones fighting amongst each other.
Can You Have More Than One Policy?
Of course! You can even take out multiple policies from the same provider. Many people like to take out a whole life policy and pair it with a term life policy, or add a term life policy with more coverage if they plan on traveling for extended periods.
Many people also have a group life insurance policy through their work which is often free for them, but it doesn’t offer much coverage or benefits; adding a term life insurance can drastically increase your coverage and keep the costs low since the group policy still isn’t costing you anything.
What is the Best Provider?
This question opens up a can of worms and in all honesty it cannot be answered fully because everyone’s situation is different. One provider might reject your application, while another approves it, and two can offer drastically different coverage options to the same person. Think of life insurance as a stock. Some providers are more “aggressive” and are willing to risk more coverage on people with a higher risk of dying, while other providers are more conservative and only approve their highest class policies for the healthiest.
With this disparity in the market, it is important to shop around. Just because you got a bad quote from one company doesn’t mean you’re out of luck everywhere.
Liran Hirschkorn is the founder of ChooseTerm.com and is an expert in the insurance industry where he works hand in hand with the best life insurance companies. Feel free to contact him with any more questions you might have.
Do you have life insurance? Why or why not?
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MakingSenseofCents says
I agree Catherine! It's especially important when you have children.
My recent post Common Concerns for Life Insurance Newbies
MakingSenseofCents says
I have a little bit of life insurance provided by my work, nothing else though.
My recent post Common Concerns for Life Insurance Newbies
Brian says
I do not have life insurance and will probably not get any. Why you may ask? While the death of either my wife or I would be terrible, we have enough assets that the other will be more than fine. We also have enough assets that we can cover the cost of college for our almost 1 year old (my God how time flies). Our house is paid for and we have no debts. So we are just going to continue to self-insure and take on the risk ourselves.
Note, I am not against life insurance, I am just at a place where I can do it myself. If my situation were different I would seriously look at term coverage.
Liran says
Brian, that's awesome! Life insurance is only needed when someone would suffer financially in the even of your death. In your case that isn't the case and so there is no need for coverage.
Matt Becker says
Both my wife and I have a large amount of term life insurance that we've bought outside of work. For a parent, it's almost always a necessity unless you have an abnormally large amount of savings. We used term4sale.com to get a sense of the companies around us and what price they might offer. I wouldn't touch whole life at this point. It's generally a poor investment vehicle and if I ever have the need for whole life I can convert my term policy.
My recent post How Important is an Emergency Fund?
Liran says
Totally agree with you Matt – and you won't find many life insurance agents with the same sentiment. Commissions are high on whole life policies, and unfortunately many agents try to push this only. I would say that 95% of my clients buy term,
insurancekennewickwa says
This is an interesting post I’ve seen on this subject. You really have a good feel on this topic, and the way you wrote about it made it both interesting to read, and informative at the same time. I’m glad I dropped by. I will definitely check back in the future to read more of your entries. Keep writing!
Sarah says
My husband has life insurance through work, but I don't…. the reason being that he has the vast majority of our household income as well as our health insurance. Honestly, I have so little income, it's not even worth insuring at this point. We also don't have any children.
Liran says
That makes sense. If you did have kids, I would say that having a smaller policy on you would make sense because your husband might need to hire someone to take care of the kids, however in your case it doesn't sound like there is a need for you to have a policy at this point.
Liran says
Many people put off buying a policy – in fact most Americans think they are under insured – so you're not alone. And if you're young and healthy, pricing is usually less costly than you might thing.
Liran says
Thanks Cat!
My recent post Life Insurance For Dummies: Basics You Need To Buy Smart
Kate says
My husband and I both have life insurance policies offered as a benefit of our employment, but getting an additional one is on my list of things to do, after we complete our will. Our policy right now is not that big, but when we have children I will want to make sure that it is more so that god forbid, that money can use to provide for them.
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Liran says
My wife and I finally did our Wills last year. One thing we did was set up a trust in the will so that if god forbid we both passed, money would be managed by my brother and my daughter wouldn't get a bunch of money at 18 – rather she would get some for college, more at 25 and the rest at 30. It isn't a good idea to leave an 18 year old with too much money in their hands.
Tina@MyShinyPennies says
I have life insurance through my work, and that's it. I'm not married yet and don't have kids, so that's enough coverage for now. My parents and sisters are doing fine for themselves, so I wouldn't think to get coverage and name them as beneficiaries. I'm not sure if I'll get more coverage when B and I get married but once we have kids, that'll definitely change things.
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Kyle@DebtFreeDiaries says
I have term insurance through my work for about $3 per month. It's not a ton of coverage, but it's not horrible. Since my girlfriend and I are relatively young and don't own any assets yet, we want to make sure we don't over-do investing in life insurance. I do like the feeling of security that she will be taken care of for a little while if something were to happen for me (she is listed as my primary beneficiary).
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Liran says
You're doing the right thing at this point, if you get married or have kids, then I'd consider a term policy at that point.
Cece says
It's definitely something I need to be thinking about! I don't have kids. It would be nice to leave something to my parents and husband if I died first. Great information.
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Liran says
Thanks!
DC@Young Adult Money says
Life insurance is something I'm going to look into this year. I have some through my work, but not nearly as much as I would like to have.
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Liran says
Unfortunately no one runs to buy life insurance – so its common to put on your to do list, and it feels good when you've finally crossed it off.
My recent post What to do if You Have Been Declined for Life Insurance
mycanuckbuck says
I just have what my work offers – but we have no kids and no real debt, so it's sufficient. If that ever changes, we'll have to up it!
My recent post How Misguided Use Of Balance Transfer Credit Cards Can Hurt You
Jai Catalano says
I am so on the fence about life insurance. I think about it all the time. Now that I have kids it makes much more sense.
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Liran says
You should congratulate yourself. Many people think they are immortal 🙂
John@MoneyPrinciple says
We had life insurance when our financial journey began and discovered that not only were we paying too much, it was not giving us sufficient cover anyway. So we shopped around and took term insurance to cover us for the immediate future. Then when we though about it a bit more, we decided we did not need so much (partly as the debt had been substantially reduced) and started working the other way round – how much would the survivor need? But it is useful in giving some peace of mind.
My recent post You say tomato, I say let’s go:eat for less
Liran says
What you are describing makes a lot of sense. If you are wise with your money your assets increase over time, and you should need less insurance as you age – hence the principle behind buying term insurance. One thing many people don't know is that there are life insurance companies that allow you to reduce your coverage and lower your cost – a good option if you have reduced debt and increased assets.
Alexa says
I don't have life insurance. I am on a *very tight budget* right now. I know it's something that I need and want. If something happens to me I want to be able to leave my girls some money for college and cars and maybe a little for a wedding. I need to get life insurance.
My recent post Budgets Gone Right
Liran says
That's a terrible tragedy – imagine the emotional turmoil of 6 kids losing their dad, let alone the financial hardship. Having some peace of mine for $200 a year is well worth it in my opinion. In my case my wife and I pay about $1000 a year for coverage, but we're in New York City where cost of living is high.
daisyprairieecothrifter says
I have life insurance because we have a mortgage. If I were to die, J would have half the income on which to pay for the mortgage and life in general. J also has life insurance. We aren't over insured, we're the right amount.
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Canadianbudgetbinder says
Our life insurance came and took blood samples and they also tested for HIV. It was quite the process. We were smokers at the time as well. We were paying just over $140 a month but since we quit over a year ago now it's dropped to $70 a month. I wrote a blog post about life insurance and the costs of smoking. It was a real eye opener. After 2 years we can go back and see if we can get a further reduction.
My recent post Buy or Sell First: One Home, One House, Two Mortgages And A Pool
Liran says
Smart. Once you see the price difference between smoker and non smoker rates, it really gives you incentive to quit. Smart that you went back to them and got a rate reduction.
My recent post What Options Do You Have For Life Insurance Over 50?
Simple Living says
As mentioned in a few other comments, if you have loved ones that will need financial help once you are gone, then having insurance is a must. Insurance does not have to be very expensive and make sure you get whats adequate for your family needs.
In addition to insurance I'd say look at creating a "will" as well
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