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6 Items to Consider About Life Insurance Over 50

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It’s a common misconception that life insurance is only necessary for young, married adults with small children. The reality is, life insurance policies can prove beneficial at any age. As our lifespan continues to grow, people are having children later in life, further increasing the need for a policy that can take you to retirement age and beyond.

Are you over 50 and considering a life insurance policy? If so, read on for some expert advice to consider as you navigate through the decision-making process.

1) Do I Really Need Life Insurance at This Age?

This is a question only you can answer. Take a moment to consider who might be affected by your death. Who relies on you financially and how far into the future will they require your assistance? If you’re currently working, how would the loss of your income affect your family if something were to happen? What assets would your spouse or children have access to and what kind of debt are you still working to pay off?

Would a death benefit be helpful in covering the following once you’re gone:

Funeral costs –The average funeral costs more than $7,000. Have you set aside a portion of your budget to cover these expenses? Losing a loved one is emotionally taxing; adding the financial stress of paying for a funeral makes the process that much more difficult.

Medical bills –If your death is a result of an illness, you could leave behind a mountain of medical bills. An insurance policy could help relieve that pressure. When comparing policies and rates, ask your agent about the acceleration of death benefit rider. This is offered as a rider on many policies today and could help alleviate the financial pressures of an illness before passing on.

Estate taxes –Life insurance policies can help cover the costs associated with settling your estate.

Funding an education or providing a legacy – Do you have a loved one you plan on helping through college? Many consumers invest in a life insurance policy to ensure their family’s plan for a higher education isn’t derailed early. Policies are also purchased to ensure a donation is made in their honor to their favorite cause or charity.

2) How Much Coverage Should I Purchase?

While there’s no way to determine exactly how much life insurance your family will need, there are a few formulas you can utilize to determine the face value of your policy. Prior to shopping for life insurance, it’s important to consider your current financial, as well as your long and short-term goals. If your primary goal is to cover funeral expenses, you’ll require a lot less protection than the individual with a grandchild’s education to pay for or a mortgage to pay off.

3) What Kind of Policy Is Best?

There are multiple types of policies available, each with their own set of pros and cons. First, you’ll need to consider the two main types of plans and how each would help in accomplishing your life insurance goals.

Term insurance – Term policies offer a guaranteed death benefit of a specified amount, valid until the end of the policy term or until you stop paying your premiums. There is no cash value associated with term policies.

Permanent insurance – This works as a sort of savings account. A portion of your paid premium goes towards the policy’s death benefit, while the rest adds cash value. There are a number of different permanent policies available, so it’s best to speak with an insurance professional or your financial adviser before making your selection.

4) What About the Medical Exam?

The underwriting process varies from policy to policy. Some policies require you to submit blood work and undergo a medical exam, while others simply require the answers to a few questions. Once you’ve determined the amount of coverage and type of policy you need, your agent should be able to provide a clearer picture as to what will be required of you.

5) How Do I Choose the Right Company?

No matter what age you decide to purchase a life insurance policy, it’s important you select a company that will be there for you long-term. When considering your options, research the ratings of each company. A.M. Best Rating Services and Moody’s both offer a financial analysis rating that can help in identifying which company is the most stable. If you use more than one rating source, pay close attention to their rating system, as they do vary from site to site.

In addition to their financial stability, conduct some research to understand the organization’s history. A company that’s been around since the 1800’s has a proven track record that far exceeds one established 20 years ago. Additionally, visit the National Association of Insurance Commissioners’ searchable database to view any complaints lodged against the insurance company. This can provide invaluable insight into how an enterprise does business and how they might treat you or your family in the future.

6) Where do I start?

While much of the information you need is available online, it’s a good idea to discuss your family’s unique situation with an agent before making any purchases. They can help ensure you purchase the right amount of life insurance, without going overboard, and that you get the most bang for your buck. Navigating through the process is generally quick and painless; the hard part is getting started.

8 Ways to Get Financially Fit in Your 40’s (Part 2)

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For part two in our series on building your financial future, we will discuss some key strategies for ensuring you aren’t left in the lurch come retirement time. With just a few money maneuvers, and time for growth, you can get your cash working for you. The key is to start soon and contribute often. But where should you put your hard earned income and what added protections can you enact to keep your investments safe?

5) Protect Your Income With Disability and Life Insurance

What would you do if you were unable to work for one month? Some families would be ok, while others would crash and burn halfway through the month. Regardless of how much money you have set aside for a rainy day, it’s always good to add a little extra cushion for peace of mind. And, the more your family grows, the more important it becomes to secure your income in the event of a disability.

No one ever really believes the unthinkable could happen to them. But, according to the Council for Disability Awareness, a 35-year-old male in good health has a 21% chance of being out of work for at least 3 months due to a disability. A healthy female has a 24% chance of becoming disabled short-term.

The best way to secure your family’s future financially is to invest in life insurance and disability insurance. Many employers offer disability insurance for a very reasonable premium. If it’s offered to you, take it.

Life insurance, however, is typically best purchased as an individual plan. Employer-based policies are limited in coverage and you can’t take it with you when you leave the company. An experienced agent can help you identify your family’s unique life insurance needs and assist you in finding an affordable policy.

6) Start a College Fund

If you have children, the necessity for a college savings fund will more than likely rank fairly high on your list of financial to-dos. Education is and always will be a critical tenant of success and we all want the best for our kids. By starting early on a savings plan, you will contribute a smaller amount overall in relation to your end results.

7) Construct Your Financial Dream Team and Discuss Regularly

Many financial advisers recommend knowing your worth and having it in writing. Sit down once a year and write a net worth statement. Review your annual statement line by line with your financial planner. Come up with a financial strategy and update it annually, checking to see how far you’ve come and how far you have left to go.

It’s also important to consult with your spouse or significant other once or every other month to ensure you’re on the same financial path. Consider your expenditures and where you can better allocate your funds. This can also be a chance to make reminders about upcoming annual bills and renewals, schedule payments or delegate responsibilities. Planning ahead, even a couple months, can prove beneficial for both short and long term financial stability.

8) Retirement Savings Begin Today

It’s never too early to begin saving for your retirement, as the level of financial freedom you’re afforded in your golden years directly correlates to what you’re putting aside right now. It can be a challenging endeavor, though, to knowingly squirrel money away for the future when it feels as if there are so many things to spend money on now. The key comes from following your financial plan and realizing that the payoff will far exceed the current wants.

A successful method for actualizing the money you should be saving is considering what percentage of your income you’ll be able to replace annually or monthly. A successful ratio would be in the 80-85% range. In other words, your savings should be able to cover 85% of your monthly salary. You gain a bit of ground because you can factor out your previous retirement contributions.

Overall, the key to future financial security is to invest, protect, and stick to the plan. Even if you waiver at times, make it a goal to make up any lost ground as soon as possible and continue reaching your regular goals. It can be a challenge, but also becomes a great reward. And, once you are following a successful plan, you won’t miss the nominal amounts you’re diverting. For more information on achieving financial freedom or if you missed Part One in our series, visit our website today.

8 Ways to Get Financially Fit in Your 40’s (Part 1)

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Many people consider the prospect of turning 40 as a negative. We’re getting older and our bodies are starting to show their signs of wear and tear. Life as we knew it no longer exists; it’s time to buckle down and really start being an adult. Well, part of this is true. Turning 40 means we’ve officially hit the “middle age” mark. It’s time to start considering our future as much as the present.

For me, the old saying “Life begins at 40” couldn’t be more true. It’s a time to reflect on lessons learned. A time to use the past to help write our future. To quote one of America’s greats, Benjamin Franklin, “at 20 years of age the will reigns; at 30 the wit; at 40 the judgment.”  The wisdom we gain in the first half of our lives is instrumental in shaping the second half.

No matter what life changes you’ll experience over the next decade, many of us view our 40’s as a time to get serious about financial planning. It’s our first true glimpse at mortality and it awakens us to the truth – we still have 20-30 years to save and invest for our retirement years. And, if done correctly, we can release the shackles our past financial decisions have placed on us and take back our financial freedom.

Let’s check out some expert advice that everyone in their 40’s (or even 30’s) should seriously consider enacting in order to lay the groundwork now for financial security in the future.

1) Start an Emergency Fund

Have you ever been blindsided by life? Imagine car trouble and a medical emergency, all within a few days or weeks of each other. The financial and emotional stress can send you into a tailspin, leaving you scrambling to make it all work.

Most people in this situation have to borrow money or charge these unexpected events to a credit card, leading to a cycle of debt and financial insecurity. In fact, according to a recent NeighborWorks America survey, 34% of Americans have no rainy day savings to fund these unexpected emergencies.

So, how can you prepare for a rainy day? Well, that depends upon your unique situation. Experts suggest having a minimum of one month’s worth of take-home pay set aside. Ideally, three months salary should be your target number. For those who are self-employed or have a more inconsistent income, you should plan for up to 9 months in savings.

2) Manage Your Debt-to-Income Ratio

Your debt-to-income ratio (DTI) is the figure lenders use to gauge how well you manage your debt. To ascertain your DTI, add up all of your minimum monthly loan/debt payments and divide the sum by your gross monthly income.

For example, if your home mortgage is $1,200/month, $400 for your vehicle, and you owe $300 monthly for minimum credit card payments, your monthly debt total is $1,900. With a gross monthly income of $3,900, your DTI would be approximately 49%.

DTI is one of the most critical components lenders look at when considering approving a loan. The lower the number, the less of risk you’re considered. While there’s no set rule regarding the numbers, experts recommend maintaining a DTI of 25% or less.

3) Get Serious About Unsecured Debt

Unsecured debt is one of the biggest financial burdens young adults take on. They carry the highest interest rate and you have nothing to show for it in the end except snowballing debt.

To determine if you’ve taken on too much unsecured debt, do an analysis. Itemize your debt by interest rate, so you have a clear picture of what you’re up against. Then, devise a plan to pay it off, ideally in the next five years. Consider tackling the credit card with the highest interest rate first. Pay the minimums on all other cards, putting all extra monies towards the high-interest card until it’s paid off. You’ll be reducing your debt-to-income ratio, improving your credit score, and putting yourself in a better situation financially.

Whether you have a significant amount of unsecured debt, or have kept it in check, it’s best to pay cash for as much as possible. This ensures you only purchase what you can afford.

4) Manage Your Credit Score

Another tool lenders use during the loan qualification/underwriting process is your credit score. Your FICO score can range anywhere from 300 to 850, with 850 being the best. While standards regarding what constitutes a good or bad score vary from lender to lender, the below is a good reference when determining your credit health. And the lower the score, the higher your interest rates (assuming you qualify) on everything from your home loan, to auto loans and credit cards.

Excellent Credit: 750+

Good Credit: 700-749

Fair Credit: 650-699

Poor Credit: 600-649

Bad Credit: below 600

To determine your credit score, we recommend checking with all three credit bureaus – Equifax, Experian and TransUnion. Everyone is entitled to one free credit report, per credit bureau, annually.

Stay tuned for Part 2, where we explore additional strategies for achieving financial freedom in your 40’s. Remember, it’s never too late!

7 Common Financial Mistakes 20-Somethings Make (and How to Avoid Them)

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Your 20s are a unique time. You’re discovering yourself and learning about what life is like in the “real world.” It’s a time for maturity and growth, all while trying to hold onto your youth. It’s also a time for milestones – you’ve graduated from college and, hopefully, will get your first professional job. Some will get married, buy houses, and even think about starting a family.

What you’ll also do, is make mistakes. And the beauty of it is, you will have time. Time to learn and grow from those mistakes, as well as recover from them.

While much of our personal growth stems from mistakes we’ve made, life is easier when we’re able to learn from other’s past mistakes. Today, we wanted to share some common mistakes made by 20-somethings along with some advice that might help you avoid the disappointment and allow you to focus on enjoying all that your 20s has to offer.

Mistake #1: Underestimating the Value of Disability Insurance

Life can change in an instant. You’re far more likely to suffer from a disability that prevents you from working than you are premature death. And the results can be catastrophic. In fact, According to the American Journal of Medicine, disabilities are responsible for 62% or all personal bankruptcies. Yet approximately 1/3 of the American population has disability insurance.

Don’t risk your financial stability just to save a little on your budget. Most employers offer disability coverage at an affordable price. If they don’t offer coverage, private disability insurers also offer affordable rates; and those policies can follow you from job to job.

Mistake #2: Not Having Life Insurance

Most young people believe they don’t need life insurance. But the reality is – this is the best time to buy. This is the cheapest your life insurance will ever be and your body is at its healthiest.

Before investing in life insurance through your employer, do your research and request quotes for individual policies. You’ll likely qualify for a cheaper rate and will still have coverage if and when you move on to the next stage in your career.

Mistake #3: Putting Off Saving for Retirement

While you have at least 45 years until retirement, it’s never too early to start saving. The earlier you begin saving, the more time you have for financial growth. The longer you wait, the more the math works against you. Saving early = a comfortable retirement.

Mistake #4: Focusing Too Much on Paying Down Student Loans

It’s only natural to want to pay down your student loans as quickly as possible. It’s the last thing tying you to your youth and it feels like a monkey on your back. While we agree, paying down debt should be a priority, many financial advisors urge 20-somethings to focus on maintaining a well-balanced budget. Many make the mistake of paying out too much too soon and find themselves in a situation where they must use credit cards to live. Interest rates on credit cards are around 20%, while student loan debt is tax deductible and comes with a much lower interest rate. Keep yourself more financially free by avoiding credit card debt as much as possible.

Mistake #5: Paying Higher Taxes

Everyone’s always excited when they receive their tax refund. But the reality is – you’ve given the government an interest-free loan using the money you’ve earned. Adjust your withholdings and use your hard-earned money throughout the year.

Mistake #6: Ignoring the Importance of a Good Credit Score

Believe it or not, you’ll have just as much difficulty obtaining a low-interest loan with no credit, than you will with bad credit. In fact, it’s no longer just banks who show interest in your credit score – employers, insurance companies, and landlords also consider your credit score when reviewing your application. Start working on your credit score now by paying your bills on time and opening up a credit card that you use and pay off each month.

Mistake #7: Living Above Their Means

When you embark on your path to adulthood, you’re pulled in a million different directions. You start out with virtually nothing, while earning the least amount of money. It’s easy to get caught up in trying to keep up with the Joneses. By the time you realize you’re living above your means, it’s too late. The damage is already done.

Rather than making big purchases on credit, set goals for yourself. If you want that new couch, make it a short-term goal and save for it. Put money away in a rainy-day fund; you never know when unexpected expenses might come up.

In the end, the best advice for continued financial independence is to learn to properly budget what money you have and stick to your plan. Often, young workers have a tendency to spend as soon as they get paid with no foresight to unforeseen costs and expenses. This may work for a while, but eventually most want more than to just get by. Especially as we age, many realize the importance of planning for your future while you’re young. The practice of budgeting and being financially intelligent is a lifelong endeavor and is made more successful by initiating positive habits at a young age. Even enacting a few steps are steps in the right direction. Get your money working hard for you now so you don’t have to work so hard for your money later.

9 Advantages of Term Insurance

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Ushering in the New Year fills us with hope and promise. It’s a time to reflect on all the great memories and lessons learned. Whether you make annual resolutions or continuously add to your list of goals, we start with a clean slate – 365 days to build the next chapter in your life’s book. For many, getting more financially fit is part of their goals moving forward. Investing in term life insurance is a wonderful and affordable way to ensure financial security for you and your family for years to come.

Navigating the ins and outs of life insurance options can be disconcerting, which can cause many to “save it for another day.” If you’re considering your first life insurance policy, there are a number of things to consider. Before making your final decision, we recommend speaking with a knowledgeable professional about your unique needs.

Term life insurance offers many advantages over permanent life products.

More Coverage for Less Money

Term life insurance policies allow for the largest death benefit at the lowest price, particularly in your youth. Some premiums increase at each renewal, however, so be sure to review the policy’s illustration with your agent before making a commitment.

Flexibility

The great thing about term life insurance is that it comes with many options. Coverage is offered for as little as one year, or as many as thirty years.

Simplicity

Unlike permanent insurance, term life is easy to understand. Because it’s simple in nature, shopping for quotes is both quick and easy, as is the decision-making process. You have just three decisions to make – length of term, coverage amount needed, and favored insurance company.

Added Riders for Broader Coverage

None of us can predict the future, making it that much more difficult to commit to a life insurance policy long-term. Insurance providers understand this and offer a number of riders to accommodate your evolving needs. If you’re unfamiliar with these riders, our blog Hidden Value: 8 Term Life Insurance Riders You Should Consider offers details on term insurance riders and their advantages.

Not Part of Probate

Unless the estate is named as the beneficiary of the estate, life insurance death benefits are not included as part of the probate estate. Thus, beneficiaries are paid without any of the typical delays cause by administration of the estate.

Often Exempt from Taxes

Term life death benefits are typically exempt from federal income taxes, as well as from state inheritance taxes.

Meets Short-Term Life Insurance Needs

If you’re looking to fulfill temporary life insurance needs, term life insurance is typically your best option. This is particularly true for consumers under forty-five and for terms of less than ten years. If term of protection needed is between ten and fifteen years, or if you’re older than forty-five, it’s best to meet with an insurance professional to discuss your options.

Convertible

We all know how difficult it is to make a decision now that can affect you for years to come. Most term policies have an option to convert to permanent insurance at a later date. This allows policyholders to have the best of both worlds – higher death protection during the younger years and locked-in premiums later in life, as they build up cash value.

Affordable for Those Just Embarking on Their Careers

Many young professionals realize the value of purchasing life insurance, yet don’t have the funds to commit to permanent policies. Because term insurance doesn’t build cash value, insurance carriers are able to offer higher coverage at a fraction of the cost of a permanent policy. This affords young families the peace of mind of knowing their loved ones are cared for should something happen, without breaking the budget.

While our life insurance needs vary, depending upon each unique situation, term insurance is a viable option for many. Vista Life Plan’s term life insurance tool can help you easily compare rates.

5 Reasons to Convert Your Term Life Insurance Policy

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Despite their advantages, many consumers forgo permanent life insurance policies for term life, instead. Term policies are often viewed as an affordable option for satisfying an immediate need for coverage. Some financial advisors even recommend purchasing term policies and investing any additional monies in the stock market for higher overall gains.

Most term policies come with a Term Conversion Rider, which allows the policyholder to convert their term policy to a permanent policy, should their family’s needs change. If you’re in the market for a policy, be sure to discuss this option with your agent.

Already have a term policy in place? Read on to find out the top reasons why you might benefit from converting your term policy to a whole life product.

1) Your Family Could be Deeply Impacted Financially Following Your Loss

Anyone who’s faced the financial challenges that come with caring for a terminally ill or developmentally challenged family member understands its far-reaching effects. While it comes with a higher price tag, a whole life policy offers additional financial security through accumulated cash value. This can be borrowed upon at any time, adding another layer to peace of mind.

2) You’ll Likely Outlive Your Term Insurance

Term insurance has the advantage of being the most affordable option. But affordability comes with a price – you could pay years of premium, only to outlive the policy term. In fact, only about 2% of term life policies actually pay out. Once the term has expired, you lose all invested premiums, unless the policy is converted. While your family was protected in the event of your death throughout the term, you’ve made an investment that resulted in zero gains.

3) Restructuring of Your Estate

Unlike term policies, whole life insurance policies are a more effective strategy for estate-planning. Not only will they carry more security and value, they’re an effective way to ensure your family doesn’t suffer a devastating blow from incurred estate taxes.

4) Restructuring of Retirement Income

If retirement is no longer in your too distant future, you might want to consider converting your term life policy. The principal of a whole life policy is tax exempt, making it the ideal savings tool. These tax-sheltered policies can help ensure a consistent retirement income, so you can fully enjoy the fruits of your labor.

5) Financial Priorities Change

If you purchased your term policy 15 years ago, you were likely in a different position, both financially and health-wise. It was difficult to anticipate what might happen next week, much less 10 years down the road. If you feel a continuation of coverage might be necessary once the term expires, conversion could be your most affordable option. A new policy means another application and medical exam. Depending upon the outcome, this could result in higher premiums or, depending upon any health setbacks you’ve experienced, a declination in coverage. Fortunately, policy conversion allows you exemption from that medical exam.

Assuming your term policy has the necessary riders, you can convert some or all of your term life insurance policy anytime before the conversion expiration date. If you’re positive this is the avenue you wish to take, the earlier the better, as permanent policy premiums increase with age. It’s a good idea to review your life insurance policy with your insurance agent annually to ensure it still fits your family’s needs. After all, what’s the point in making such an investment if your family will still be left financially exposed?

What is an Indexed Universal Life Insurance Policy?

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If you’ve been reading our posts, you, hopefully, understand the difference between term and permanent life insurance. Each has their own pros and cons that should be considered when deciding how to spend your hard-earned dollars. If you think permanent insurance is the route your family should take, there are quite a few options you should consider.

For many, understanding life insurance is confusing. The language is complicated and the various options make it that much more daunting. Once you understand the concepts behind it though, it’s fairly easy to understand. Today, we wanted to delve a little deeper into our favorite Universal Life policy – the Indexed UL, along with its pros and cons.

Let’s start with a brief definition of Universal Life.

What is Universal Life Insurance?

Universal life insurance gained traction in the late 70s and early 80s. Consumers were frustrated with the small returns on their Whole Life policies and began removing their cash value to explore other investment options. Rather than restructuring how they paid dividends, many insurance companies decided to create a new product. And the Universal Life Insurance (UL) was born.

While the UL is a permanent policy, it has often been described as having a term framework. Essentially, it is a savings account attached to a term policy. A term policy remains active, as long as the premiums are paid, until the agreed upon term length is over (120 years is standard). Unlike term, the UL doesn’t have a set length of time. It remains in place as long as the savings account maintains cash value and the policy’s expenses are paid. The policy starts out very cheap and increases incrementally as you age. For those who consistently maintain cash value in their account, the interest earned is generally high enough to cover the premium charges due upon each renewal.

Earned interest rates are set by the issuing insurance company. They are typically competitive with market interest rates and many companies offer an interest increase once the policy has reached ten years. Interest is credited to the cash portion of the account; dividends are not offered on a UL. If performance or mortality experience is higher than expected, many insurance carriers will pass this on to their policyholders in one of two ways: a reduction in term costs or as an increase in interest credited.

What is an Indexed Universal Life Policy?

Indexed Universal Life insurance is a UL policy that offers it’s policyholders two options – an earned fixed interest rate paid on cash values or a rate that fluctuates based off the movement of the index the client has chosen. While the S&P 500 is the most popular option, the followed index varies from company to company.

Due to the indexing feature, many consumers are led to believe they are exposing themselves to the risks of the stock market. This is untrue and should not be presented as such.

The index is simply the insurance company’s method of determining the interest rate the Indexed UL policy will earn. The indexing feature has a “participation rate” that defines how much of the index’s rise will go towards the policy’s interest rate. This varies from product to product, but many have a 100% participation rate, meaning whatever movement the index makes, the policy will as well (up to the cap).

As mentioned, the indexing feature will generally have a cap on it. Let’s say, for example, if the cap is set for the 13% in the S&P 500. If the S&P rises above 13%, the maximum the Indexed UL will earn is 13%.

The Pros and Cons of an Indexed Universal Life Policy

One of the biggest advantages of an Indexed UL is flexibility. The policyholder has complete flexibility and control regarding their premium amount and timing. If one falls on hard times, the planned premiums can be reduced down to zero, with these reductions made in the coming years.

For those looking for positive growth, without exposing themselves to the volatility of the stock market, an Indexed UL is a great choice. Additionally, you have the option of withdrawing cash from your policy at any time, without facing the stiff penalties and restrictions that come with early withdrawal from your retirement account.

As with anything, however, the UL does have a few cons that should be considered. Many of these policies are loaded with set-up fees that can take several years to pay off. If you’re hoping for positive growth in your cash fund right away, be sure to discuss your goals with your insurance agent, as this might not be the policy for you.

Some consumers are looking for a product that offers strong positive growth. The insurance company has their own process to determine how much cash you’ll gain from the S&P increase. They also impose an earnings cap. Make sure you understand all of the policy’s restrictions before making your final decision.

Due to its flexibility and cash value growth, the Indexed Universal Life product is one of the fastest growing life insurance products on the market. As we’ve mentioned in the past, however, there is no one-size-fits-all policy for consumers. If you’re ready to learn which policies fit your family’s needs and would like to learn more about this product, don’t hesitate to contact us. And stay tuned in the coming weeks, as we further explore the intricacies of Universal Life policies.

How Much Life Insurance Coverage Should I Purchase?

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Purchasing life insurance is something many of us try to avoid. Some steer clear of the subject, assuming it’s too expensive to fit into their budget. Others just don’t want to disrupt their day with such morbid thoughts. Particularly when it comes to placing a value on their own life.

While it feels morbid, investing in life insurance has a multitude of advantages. The most important being the peace of mind of knowing your family is protected in the event of your death. But, how can you possibly place value on a human life? The reality is, every life is important and no amount of money can replace a human life. There are, however, a number of tips you can apply when determining the face value of your life insurance policy.

Realizing Your Human Life Value

The primary goal of your insurance policy is to provide for your family when you’re no longer there to do so. There are a number of factors included in the human life value equation, including occupation, age, income, number of children, and employer benefits. Let’s take a closer look at these components.

Income

It’s been a long-standing rule to multiply your income times ten when determining your life value. While this might be a great place to start, your age should be factored into this equation.

For example, a 72 year old will likely need less than a 40 year old. The 72 year old typically has less expenses, is nearing the end of his/her career, and has children grown and out of the household. They could probably get by with 4-10 times their annual income. Whereas the 40 year old has a number of years left in their career, has younger children at home, and still has many years left on their mortgage. When determining policy amount, this individual should consider 14-20 times their annual income.

It’s also important to remember that both spouses add value to the household. Many consumers feel they can get by with skipping an insurance policy for the homemaker. But think about all the your spouse does each day to ensure the house runs smoothly. Who will provide those services when they’re gone? Consider each of these services and how much it would cost to hire someone to perform them on an annual basis. You’d be surprised at how quickly the expenses add up.

The DIME Formula: A More Detailed Approach

The DIME formula prompts you to consider all the details of your financial situation. It stands for debt, income, mortgage and education.

  • Debt and final expenses: Conduct research regarding the current cost of funeral expenses. Add that to your total debt, with the exception of your mortgage.
  • Income: How many years would your family need financial support if you were to die unexpectedly? Multiply your annual income by that number.
  • Mortgage: What is the current balance on your mortgage?
  • Education: How many children do you have? What would be the total cost of a college education for each child?

While the DIME formula is more comprehensive than the first two life value options, it doesn’t take into consideration any savings, assets, or the unpaid contributions of a spouse that stays at home. If you’re looking for a more precise number, consider the following formula.

  1. Annual salary (times the number of years you’ll need to replace) + mortgage balance + other unpaid debt + funeral expenses + college education for children + cost of replacement services for stay-at-home spouse
  2. Total from #1 – savings – existing college fund accounts – additional assets – current life insurance

Determining the amount of life insurance necessary to support your family is a task no one finds pleasant. There’s no way of knowing exactly how much insurance would support your family properly. If you come up with a number and it’s lower than what you expected, go with the larger amount. Term life insurance policies are very affordable; adding a bit more to the policy’s face value will save you peace of mind, while barely making a dent in your budget.

Still not sure how much coverage is enough? Stay tuned – our next ebook will go into more depth regarding the amount and type of coverage that’s best for you and your family.

Young, Single, and Childless? Why You Still Need Life Insurance

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So, you’re officially embarking on the next chapter of your life. You’re fresh out of college, just started a new job, and are on the hunt for your first home. Congratulations, you’ve officially entered adulthood. Your twenties are a special time and you should enjoy every moment to its fullest. But, that doesn’t mean you shouldn’t make some “adult decisions” during this period. And purchasing life insurance should be one of those decisions.

Traditionally, people don’t start thinking about life insurance until they get married or welcome a baby into the world. What could you possibly need life insurance for before that? Who would you be protecting before that? Well, there are still a number of great reasons to consider purchasing life insurance above and beyond what your employer offers. Let’s look at a few reasons why your twenties or early thirties is a smart time to purchase.

Younger = Lower Premiums

The insurance company’s revenue is determined by the amount of premiums collected, minus the death benefits paid out for that specific risk group. Another words, every year that the insureds don’t die, their revenue goes up. The life insurance underwriter’s job is to identify the likelihood of an early payout for each applicant and the premium is adjusted accordingly. The risk of them paying out when you’re young is significantly lower. As a rule, that decreased risk is transferred to you through lower premiums.

Good Health = Lower Premiums

The other primary factor in determining your premium is your health. While it’s possible for any one of us to die at any time, you’re statistically less likely to meet an early death if you’re young and healthy. As each birthday passes, the risk of you developing a health condition rises. Once you reach your 30s, the chance of you developing a chronic condition like heart disease or high cholesterol rises considerably. So, for most consumers, the ideal time to purchase life insurance is in your twenties. Your health, coupled with your age, equates to the best possible premium.

Insurability Later in Life

A permanent life policy is recommended over a term policy, as this is a great opportunity to build a little nest egg through the cash value on your policy. Depending upon your financial situation, however, this might not be an affordable option for you. If you decide a term policy is best for your budget, don’t fret; you’re setting yourself up for a later date.

Most term life insurance policies include a term conversion rider standard on every policy. This rider allows you to convert your term policy into a permanent life policy without submitting to another medical exam. While your converted policy premium will reflect your age and overall health, this rider comes in handy for people who have developed medical conditions since the original policy’s inception. It makes the entire process smoother and more affordable.

While this rider comes standard on most policies, some companies require the benefit to be requested on the application. Be sure to check with your agent to ensure you don’t miss out on this valuable opportunity.

Living Benefits

Most people equate life insurance to death. And rightfully so. That is it’s intended purpose, right? While this is true, many people use their life insurance for living benefits as well.

Your whole life policy has the added benefit of accumulating cash value. This builds slowly at first, as there are policy set-up fees that must be paid down at its initially. But as time goes on, you’ll start to see the cash value really grow. This is your money that can be borrowed against at any time, for any reason. Many insureds use this money to help pay off student loans, offset the costs of their wedding, or even supplement their income when they get to retirement age.

When purchasing your policy, be sure to speak with your life insurance agent about the Acceleration of Death Benefit Rider. Should you become terminally ill, this rider allows you to collect on your death benefit early. This can help ease the pain of paying for medical bills or provide you with the funds to check some things off your bucket list before your death. It’s a living benefit none of us envision ourselves ever needing, but are grateful for if and when the time comes.

Your twenties are a time to celebrate. You’re officially out on your own, enjoying the wonderful gifts that life has to offer. It’s also a time to start considering financial priorities and setting yourself up for long-term success. The best time to purchase life insurance is when you’re young and healthy. If you invest in your future now, it’s one less thing you have to think about later, when you’re celebrating the growth of your family or a new home purchase. So don’t delay; speak with an insurance professional about your options today.

7 Reasons Why Consumers Hesitate to Purchase Life Insurance (and the Reasons Why You Should)

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“I’ll worry about exploring my life insurance options tomorrow.”

How many times have you uttered or heard these words? When you’re busy or your budget is tight, it’s tempting to relegate life insurance to another day’s to-do list. We understand. But life insurance is probably one of the most critical investments you’ll ever make. It ensures your family is protected in the event of your untimely death. It can even afford you financial support, should you find yourself facing a critical illness. So, why do so many still choose to overlook it?

For today’s post, we’re sharing top reasons consumers put off purchasing life insurance and how comparison shopping with us can put your procrastination to rest.

1) I Don't Want to Think About Dying

The only thing certain in life is death. Still, it’s not something any of us care to think about. As adults, we’re confronted with issues we often choose to ignore. This never alleviates the problem, though. The most logical and responsible thing to do is face the issue head-on, make a decision, and shift your focus back to living. It doesn’t have to be a painful process. The Vista Life team can help you understand the coverage you need and comparison shop quickly and confidently.

2) It’s Complicated

We live in a society where virtually everything can be researched and purchased online. While life insurance is no exception, many consumers become intimidated and walk away, when they have to weigh their available options. Life insurance has a unique value that differs from person to person. It’s critical that you discuss your needs with an experienced professional that can offer guidance and support. Purchasing life insurance doesn’t have to be a daunting task, but it is an investment you want to take seriously.

3) Paralyzed by Fear

No one likes making the wrong decision, particularly when it’s costing them money. But not making a choice at all is the worst kind of decision. Your need for life insurance isn’t going to dissipate over time. In fact, it’s likely that it will grow. Doing so now will ensure your premiums are the lowest possible and that your family is protected in the event of your untimely death. And, while it’s not recommended, you can always cancel the policy later if you really feel you made the wrong decision.

4) Don’t Have Time

If you’re anything like me, you often feel there’s not enough time in the day to get everything done. Cross one thing off the to-do list and two more things get added. Purchasing a life policy doesn’t have to be a lengthy process. In fact, you can obtain comparison quotes through Vista Life in less time than it takes to fill up your tank at the gas station.

5) I’m in Great Health, Why Would I Need Life Insurance?

You just had a physical and got a clean bill of health. Congratulations! Unfortunately, there are no guarantees in life and your health is no exception. Remember, insurance protects our family against the unknown. Do you really want to gamble with your family’s future?

6) It’s Too Expensive

One of the top reasons why people fail to purchase a life insurance policy is cost. If budget restrictions are a concern for you, don’t give up hope. There are a multitude of affordable options available. Don’t allow this common myth hold you back from investing in your future.

7) I Have a Pre-Existing Condition, I Know I'll Be Denied

Many consumers work under the assumption that a medical diagnosis immediately makes them uninsurable. While a medical condition typically results in a higher premium, the underwriter considers your ability to control said condition which determines insurability and price. At Vista Life, we’ve made it our mission to find affordable coverage for every insurable risk.

Most people want to enjoy their life, particularly the fun times with friends and family. It is understandable that people shy away from thinking about the end of their lives. No one wants to think about leaving their friends and family before their time. Working with a qualified professional will allow for a seamless and painless life insurance process. Once you’ve made your final decision, you can rest easier at night and get back to living life to it’s fullest. At the end of the day, that’s all any of us really want.